Whoa- careful there. Flextronics won't get Jabil's margins.
Flextronics does a lot of small consumer product assembly like mice and personal organizers that are low margin. I don't see Flextronics getting jabil's margin, but if you simply use 4.0 and 4.5% net margins, you get some big numbers, and that's enough to buy the stock here. (I already own so much, that I shouldn't really buy anymore.) Also you might look at the margins before goodwill amortization, interest charges, and taxes, and compare margins on that basis. I think Flextronics margin on that basis is about 6.0% versus Jabil's margin of 7.2%. I expect Flextronics margin on this basis will improve somewhat to maybe 6.5% on this basis. But I've learned that margins, PE, and PSR all can be mis-leading for the ECM sector. I think Robby Stephens analyst J. Keith Dunne has got a great article on valuing ECM stocks. Patroller posted his article on the Jabil thread:
Message 2965370
All said though, I'm looking forward to Flextronics January report. i really don't know what the reported EPS will be, but they are going to report impressive revenues growth, and new contracts, and positive forward looking remarks. They may announce they plan to purchase the remaining 60% of FICO plastics (Chinese plastic company) they don't own yet. Finally, please be sure to disregard published outstanding share number on FLEXF of 13.7M and use 21M shares in your calculations. They sold 2.2M shares in a secondary, issued 2.8M shares for Neutronics, and have about 2.3M in-the-money incentive options outstanding. Also next June they will give Stephen Rees $14M worth of stock (approx 390k shares) as the final payment of the Astron purchase. Also remember the debt level of FLEXF.
It takes some work to properly evaluate FLEXF.
Paul
|
