Thursday, June 24, 2010

Stock Buy: Sanmina-SCI Corp.

Sanmina-SCI Corp. (SANM: 15.66 -0.12 -0.76%) recently rebounded from a key trend line after hitting a new multi-year high in late April at $15.85. The recent gains come on the heels of the company’s return to profitability after posting better than expected Q1 results in late April that included a 15% earnings surprise.
Company Description
Sanmina-SCI Corp. brands itself as “The Manufacturer Behind The Brand,” specializing in providing manufacturing services to some of the leading electronics companies in the world. The company was founded in 1980 and has a market cap of $1.24 billion.
First-Quarter Results
Revenue for the period was up 28% from last year to $1.53 billion. Earnings also came in strong at 23 cents, 15% ahead of the Zacks Consensus Estimate, bringing the company’s average earnings surprise over the last four quarters to 92%.
The company complimented its nice top line growth with some solid margin expansion, with gross margin up 200 basis points from last year to 7.7% and operating margin up 400 basis points to 3%. On the earnings call, the company said that it expects a 10% to 15% contribution margin over the next few quarters.
Solid Balance Sheet
The company also has some financial flexibility with its strong balance sheet, carrying $673 million in cash and equivalents against a total debt load of $1.261 billion.
Estimates Advance
Estimates took a nice jump higher on the good quarter, with the current year adding 17 cents to $1.02. The next-year estimate is up 42 cents in the same time to $1.56, a bullish 52% growth projection.
With a forward P/E of 14.91X, SANM trades at a discount to its peers 15.51X. Its P/B of 1.99X is a slight premium to its peer’s 1.70X, but still well in value territory.

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