Investment Thesis
Sanmina demonstrates solid financial stability with strong free cash flow generation ($433.9M) and manageable debt (13.9x interest coverage), but deteriorating profitability is concerning—net income declined 7.6% YoY despite 7.4% revenue growth, indicating margin compression. Extremely thin margins (8.3% gross, 2.0% net) and poor capital efficiency (5.5% ROE, 1.5% ROA) suggest structural challenges in the competitive PCB industry.
Strengths
- Strong free cash flow generation of $433.9M with 6.0% FCF margin, demonstrating effective cash conversion
- Solid liquidity position: 1.71x current ratio and $1.6B cash reserves provide financial flexibility
- Robust debt servicing capacity with 13.9x interest coverage ratio, mitigating refinancing risk
- 7.4% revenue growth indicates maintained market demand despite industry challenges
- Manageable leverage at 0.83x debt/equity ratio
Risks
- Net income declining 7.6% YoY despite revenue growth signals margin compression and operational inefficiency
- Critically low profitability margins (2.0% net, 3.2% operating, 8.3% gross) leave minimal error tolerance and limit earnings power
- Poor capital returns with ROE of 5.5% and ROA of 1.5% indicate capital is not being deployed efficiently
- Long-term debt of $2.2B represents 85% of stockholders equity, limiting financial flexibility for strategic investments
- Commodity-like nature of PCB industry with likely persistent pricing pressure on margins
Key Metrics to Watch
- Gross margin trend—critical to assess whether pricing power recovers or cost pressures persist
- Net income and operating margins in subsequent quarters—need to confirm whether compression stabilizes or worsens
- Free cash flow sustainability—monitor if FCF generation can be maintained amid profitability challenges
- Debt levels relative to EBITDA—ensure leverage does not rise as profitability stagnates
- Return on equity trajectory—track whether capital efficiency improves or continues declining
Financial Metrics
Revenue
7.2B
Net Income
142.9M
EPS (Diluted)
$2.58
Free Cash Flow
433.9M
Total Assets
9.7B
Cash
1.6B
Profitability Ratios
Gross Margin
8.3%
Operating Margin
3.2%
Net Margin
2.0%
ROE
5.5%
ROA
1.5%
FCF Margin
6.0%
Balance Sheet & Liquidity
Current Ratio
1.71x
Quick Ratio
1.03x
Debt/Equity
0.83x
Debt/Assets
0.0%
Interest Coverage
13.87x
Long-term Debt
2.2B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-04-29T15:56:02.928488 |
Data as of: 2026-03-28 |
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