Flex Soars 241% in a Year: Should Investors Still Buy the Stock?

Flex Ltd.’s FLEX shares have appreciated 240.9% over the past year, outperforming the Zacks Electronics – Miscellaneous Products industry’s growth of 104.9%. The Zacks Computer and Technology sector and the S&P 500 composite have registered growth of 43.5% and 28.1%, respectively, over the same time frame.FLEX has also outperformed its peers, Cisco Systems, Inc. CSCO, Jabil Inc. JBL and Sanmina Corporation SANM. CSCO, JBL and SANM have climbed 89.1%, 113.1% and 190.1%, respectively, in the same time frame.Image Source: Zacks Investment ResearchFlex continues to gain from expanding AI and data center exposure, global manufacturing scale, improving margin profile, steady cash generation and targeted acquisitions.Let us take a closer look at FLEX’s fundamentals, key growth drivers, competitive strengths and potential risks to determine whether the stock remains an attractive investment.Flex’s TailwindsFlex is gaining from its strategic transformation toward higher-value, technology-intensive businesses, positioning itself to capitalize on long-term structural growth opportunities. The company has streamlined its portfolio by exiting consumer-focused markets, divesting non-core assets and investing in advanced technologies while maintaining disciplined execution over the past seven years. The planned spin-off of its Cloud and Power Infrastructure (CPI) business is the next step in this strategy, enabling both entities to sharpen their strategic focus, optimize capital allocation and pursue their respective growth priorities more effectively. Post-spin, Flex intends to focus on advanced manufacturing opportunities across healthcare, robotics, warehouse automation and networking, strengthening its exposure to high-growth and technology-driven markets.The company is also benefiting from the rapid expansion of AI-driven data center infrastructure. Its CPI business has built a differentiated end-to-end platform spanning power infrastructure, thermal management and compute integration, allowing customers to rely on a single partner rather than multiple vendors. Management believes the ongoing transition toward integrated power and cooling architectures, along with the adoption of solid-state transformers and 800-volt DC distribution, creates a significant long-term opportunity. These capabilities position Flex to benefit from the increasing complexity and power requirements of next-generation AI data centers.Flex continues to strengthen its competitive position through strategic investments and acquisitions. The recently completed acquisition of Electrical Power Products (EP2) expands its utility-grade power solutions portfolio, enhancing its ability to deliver comprehensive solutions for grid modernization and electrification. The company has also secured substantial incremental business from several hyperscalers and data center customers, including Google, covering power infrastructure, thermal systems and complex hardware manufacturing. These multiyear engagements span multiple product categories and customers, providing diversified growth opportunities while supporting capacity expansion through fiscal 2027 and beyond.The company's financial performance further reinforces its growth story. For fiscal 2026, revenue grew 8%, adjusted operating income increased 21% and adjusted EPS rose 25%. Strong execution across cloud, power and industrial businesses, combined with continued operational improvements, enabled the company to deliver another year of record profitability and approximately $1.1 billion in free cash flow.Image Source: Zacks Investment ResearchFlex expects its momentum to continue with fiscal 2027 revenue projected between $32.3 billion and $33.8 billion, representing 18% growth at the midpoint, while adjusted EPS is expected to increase 32% at the midpoint. The CPI business alone is forecast to deliver revenue growth of 65% to 75% for fiscal 2027, followed by more than 80% growth in fiscal 2028, supported by multiyear contracts, expanding AI infrastructure demand and investments that are expected to drive further margin expansion. Management also expects capital expenditures to normalize after fiscal 2027 while maintaining strong growth and cash generation.However, the company continues to face some near-term challenges. The Integrated Technology Solutions segment remains affected by persistent softness in lifestyle and consumer-related markets, prompting Flex to continue deemphasizing lower-value businesses. In addition, the CPI segment is incurring elevated capital expenditures and infrastructure investments to support future growth, temporarily weighing on margins and reducing free cash flow conversion. While management expects these investments to generate higher returns and margin expansion in the coming years, execution risks associated with the spin-off, capacity expansion and large-scale AI infrastructure projects remain a concern.A Look at FLEX’s ValuationThe stock trades at a forward 12-month price-to-sales (P/S) ratio of 1.57, below the industry’s average of 7.57. CSCO, JBL and SANM trade at a forward 12-month P/S of 7.11X, 1.11X and 0.86X, respectively.Image Source: Zacks Investment ResearchFLEX’s Upward EstimatesThe Zacks Consensus Estimate for FLEX’s earnings for fiscal 2026 has been significantly revised upward over the past 60 days.Image Source: Zacks Investment ResearchWhat Should You Do With FLEX Stock Now?Sporting a Zacks Rank #1 (Strong Buy), Flex appears to be a compelling investment opportunity at the moment.You can see the complete list of today’s Zacks #1 Rank stocks here.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.Free: See Our Top Stock And 4 Runners UpThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks