Stock Analysis

Sanmina (NASDAQ:SANM) sheds 3.4% this week, as yearly returns fall more in line with earnings growth

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NasdaqGS:SANM
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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. Long term Sanmina Corporation (NASDAQ:SANM) shareholders would be well aware of this, since the stock is up 106% in five years. Also pleasing for shareholders was the 34% gain in the last three months.

Since the long term performance has been good but there's been a recent pullback of 3.4%, let's check if the fundamentals match the share price.

Our analysis indicates that SANM is potentially undervalued!

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over half a decade, Sanmina managed to grow its earnings per share at 19% a year. The EPS growth is more impressive than the yearly share price gain of 16% over the same period. So one could conclude that the broader market has become more cautious towards the stock.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
NasdaqGS:SANM Earnings Per Share Growth December 8th 2022

Dive deeper into Sanmina's key metrics by checking this interactive graph of Sanmina's earnings, revenue and cash flow.

A Different Perspective

It's good to see that Sanmina has rewarded shareholders with a total shareholder return of 65% in the last twelve months. That gain is better than the annual TSR over five years, which is 16%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Sanmina you should know about.

But note: Sanmina may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

What are the risks and opportunities for Sanmina?

Sanmina Corporation provides integrated manufacturing solutions, components, products and repair, logistics, and after-market services worldwide.

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Rewards

  • Price-To-Earnings ratio (12.8x) is below the US market (15.4x)

  • Earnings are forecast to grow 12.15% per year

  • Earnings have grown 44.3% per year over the past 5 years

Risks

  • Significant insider selling over the past 3 months

View all Risks and Rewards

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