Is Flex Ltd. (NASDAQ:FLEX) Potentially Undervalued?

Flex Ltd. (NASDAQ:FLEX), is not the largest company out there, but it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Flex’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Flex

Is Flex Still Cheap?

Good news, investors! Flex is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Flex’s ratio of 8.8x is below its peer average of 15.03x, which indicates the stock is trading at a lower price compared to the Electronic industry. What’s more interesting is that, Flex’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Flex?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 0.3% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Flex, at least in the short term.

What This Means For You

Are you a shareholder? Even though growth is relatively muted, since FLEX is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on FLEX for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy FLEX. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.

So while earnings quality is important, it's equally important to consider the risks facing Flex at this point in time. At Simply Wall St, we found 1 warning sign for Flex and we think they deserve your attention.

If you are no longer interested in Flex, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.