Is Flex Still a Smart Pick After 64% Rally and Strong Cash Flow Growth?

If you’ve been keeping an eye on Flex, you’ve probably noticed the stock’s relentless climb over the past year. Whether you’re thinking about doubling down or contemplating an entry point, there’s a lot to weigh. Just this past week, Flex rallied 6.2%, building on a 10.7% jump over the last month. These moves aren’t outliers either. Year-to-date, Flex is up an astonishing 64.0%, and the five-year chart shows a staggering return of 518.9%. Clearly, something’s fueling this momentum, but is the market getting ahead of itself or simply recognizing long-term strengths?

Some of the optimism surrounding Flex reflects broader shifts in global manufacturing and supply chain management. As companies rethink footprints and prioritize resilience, Flex’s role as a flexible partner puts it in a good position to capture demand. While that growth narrative is exciting, what about valuation? If you’re trying to decide whether now’s the time to jump into Flex stock or stay patient, understanding how the market is currently pricing the company is key.

By traditional valuation checks, Flex scores a 2 out of 6, signaling undervaluation in two important areas. That gives us a starting point. But what do these valuation signals actually mean, and are they telling the whole story? Let’s break down the usual valuation methods and later introduce an even more insightful way to assess what Flex is truly worth.

Flex scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Flex Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is one of the most widely used approaches to valuing a business. It works by projecting a company’s expected future cash flows and then discounting those back to today’s dollars, arriving at an estimate of intrinsic value. Simply put, it helps investors assess whether a stock’s current price reflects its long-term earning potential.

For Flex, the most recent figures show Free Cash Flow (FCF) of $1.03 billion. Analysts currently project FCF to grow to $1.27 billion by 2028. Beyond that point, additional growth is extrapolated, with cash flow estimates still climbing toward $1.66 billion by 2035 (based on internal estimates and industry trends). All these cash flow numbers are reported in US dollars.

Based on these projections, the DCF calculation suggests Flex’s intrinsic fair value is $58.44 per share. However, the stock is currently trading at about 8.4 percent above this intrinsic value, implying a modest overvaluation by the DCF standard.

Result: ABOUT RIGHT

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Flex.

Simply Wall St performs a valuation analysis on every stock in the world every day (check out Flex's valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: Flex Price vs Earnings (PE)

For profitable companies like Flex, the Price-to-Earnings (PE) ratio is often the go-to metric when investors want to judge whether a stock is attractively valued. The PE ratio compares a company's share price to its current earnings, making it a handy tool to set expectations around growth and risk. Typically, a higher PE ratio might signal optimism about growth, while a lower one could hint at either value or underlying risk.

Flex currently trades at a PE ratio of 26.7x. This sits just above the Electronic industry average of 26.1x and well below the peer group average of 37.9x. But averages can be misleading. They do not account for important differences like Flex's unique growth profile, margins, or risk factors.

This is where the Simply Wall St "Fair Ratio" comes in. Calculated at 32.5x for Flex, this proprietary metric considers a range of company-specific elements, including Flex’s earnings growth prospects, industry dynamics, profitability, market cap, and risk profile. This means it provides a more accurate context for what Flex’s PE should be, rather than making broad-brush comparisons to peers or sector averages.

Right now, Flex’s actual PE is 26.7x, which is slightly below its Fair Ratio of 32.5x. This points to Flex being undervalued when adjusting for its fundamental strengths, growth outlook, and underlying risks, at least according to this tailored metric.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Flex Narrative

Earlier we mentioned that there’s an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your personal investment story, summarizing how you think a company will perform by tying together your assumptions about its business outlook, financial estimates, and fair value. This helps you see how your beliefs stack up against current prices.

Narratives make the decision process much more powerful by connecting a company’s big-picture story directly to a detailed, transparent forecast and then computing a fair value in real time. On Simply Wall St’s Community page, which is used by millions of investors, anyone can easily create and share these Narratives. This makes valuation not just about numbers, but about your view of what drives a company’s future.

With Narratives, you can quickly compare fair value to price, highlighting when it may be time to buy, hold, or sell. In addition, your Narrative automatically updates whenever new news or earnings come in, so you always have an up-to-date verdict. For instance, some investors see Flex’s future earnings driven by rapid AI infrastructure growth and set fair values as high as $65 per share. Others focus on risks from client concentration and growing competition, assigning values as low as $50. This shows how a company’s story can change depending on what you believe will drive its future.

Do you think there's more to the story for Flex? Create your own Narrative to let the Community know!

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.

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