FLEX vs. PLXS: Which Electronics Manufacturing Stock is the Better Buy?

Flex Ltd. FLEX and Plexus Corp. PLXS are benefiting from favorable trends in the electronics manufacturing industry, supported by growing demand across advanced technologies and infrastructure markets. Flex is expanding its presence in AI-driven data center infrastructure through its power, cooling and compute integration capabilities, while also strengthening its portfolio through strategic investments and acquisitions. Plexus, meanwhile, is capitalizing on strong manufacturing program wins and growing opportunities across industrial, healthcare, aerospace and defense markets, including data center power and automation applications.Both companies are leveraging their engineering, manufacturing and supply chain expertise to pursue growth opportunities in attractive end markets. As demand for advanced electronics, automation, AI infrastructure and mission-critical applications continues to rise, both Flex and Plexus remain focused on expanding their capabilities, improving operational performance and supporting long-term growth initiatives.Let’s analyze their fundamentals, growth opportunities, market challenges and valuation to assess which one presents a stronger investment opportunity.The Case for FLEXFlex is benefiting from its ongoing transformation toward higher-value, technology-intensive markets, a strategy that has strengthened its positioning for long-term growth. Over the past seven years, the company has streamlined its portfolio by exiting consumer-focused businesses, divesting non-core assets and investing in advanced technologies while maintaining disciplined execution. The planned spin-off of its Cloud and Power Infrastructure (CPI) business represents the next phase of this strategy, allowing both organizations to sharpen their focus, improve capital allocation and pursue growth opportunities more effectively. Following the separation, Flex will concentrate on advanced manufacturing markets such as healthcare, robotics, warehouse automation and networking.The company is also gaining from the rapid growth of AI-driven data center infrastructure. Its CPI business has developed a differentiated end-to-end platform that combines power infrastructure, thermal management and compute integration, enabling customers to work with a single provider instead of multiple vendors. Management believes that the transition toward integrated power and cooling architectures, along with emerging technologies such as solid-state transformers and 800-volt DC distribution, creates a substantial long-term opportunity. These capabilities position Flex to benefit from the increasing complexity and power demands of next-generation AI data centers.Flex continues to enhance its competitive position through strategic investments and acquisitions. The acquisition of Electrical Power Products (EP2) broadened its utility-grade power solutions portfolio and strengtheed its ability to support grid modernization and electrification initiatives. The company has also secured significant new business from hyperscalers and data center customers, including Google, spanning power infrastructure, thermal systems and complex hardware manufacturing. These multiyear engagements provide diversified growth opportunities and support planned capacity expansion through fiscal 2027 and beyond.The company’s strong financial performance further supports its growth outlook. In fiscal 2026, revenue increased 8%, adjusted operating income grew 21% and adjusted earnings per share rose 25%. Continued strength across cloud, power and industrial businesses, combined with operational improvements, enabled Flex to achieve record profitability and generate approximately $1.1 billion in free cash flow. Management expects fiscal 2027 revenue to reach $32.3-$33.8 billion, representing 18% growth at the midpoint, while adjusted EPS is projected to increase 32%. The CPI business is expected to deliver revenue growth of 65-75% in fiscal 2027 and more than 80% in fiscal 2028, supported by expanding AI infrastructure demand, multiyear contracts and continued margin expansion.Despite these strengths, Flex faces several near-term challenges. The Integrated Technology Solutions segment continues to be adversely impacted by weakness in lifestyle and consumer-related markets, leading the company to further reduce its exposure to lower-value businesses. At the same time, elevated capital expenditures and infrastructure investments within the CPI segment are temporarily pressuring margins and limiting free cash flow conversion. Although management expects these investments to generate higher returns over time, execution risks related to the planned spin-off, capacity expansion initiatives and large-scale AI infrastructure projects remain important considerations.The Case for PLXSPlexus continues to benefit from strong program ramp activity and a growing pipeline of manufacturing opportunities. Fiscal second-quarter 2026 revenues increased 18.7% year over year to $1.164 billion, supported by 30 manufacturing program wins expected to generate approximately $355 million in annualized revenue once fully ramped into production. These wins were diversified across Industrial, Healthcare/Life Sciences and Aerospace/Defense markets, with notable exposure to growth areas such as data center power, automation, robotics, semiconductor capital equipment and defense platforms. Management noted that record program wins and improving market demand position the company to achieve mid-teens or higher revenue growth in fiscal 2026, while its qualified opportunity pipeline has expanded to $4 billion.The company also maintains a solid financial foundation supported by healthy cash generation and disciplined capital allocation. During the fiscal second quarter, Plexus generated $28.5 million in operating cash flow and $16 million in free cash flow, exceeding expectations despite continued investments in the business. Strong cash generation has enabled the company to repurchase shares and reduce debt, including $20.6 million of share buyback during the quarter. Over the long term, management targets annual revenue growth of 9-12% while achieving a 15% ROIC, supporting sustained shareholder value creation.However, the company’s revenue in the Healthcare segment is expected to remain flat sequentially in the current quarter, while certain Industrial subsectors continue to experience weak demand conditions. Management also guided for slightly lower gross margins at the midpoint for the fiscal third quarter due to program ramp timing, ongoing investments and higher incentive compensation expenses. In addition, uncertainty surrounding evolving trade policies continues to create a challenging macroeconomic backdrop.Near-term cash flow is expected to come under pressure as the company increases investments in working capital to support revenue growth. Management expects the current quarter to result in a use of cash and has lowered its fiscal 2026 free cash flow outlook to $50-$75 million from its previous expectation of $100 million. Higher working capital requirements, along with planned capital expenditures of $100-$120 million, are expected to weigh on cash generation. Any delays in revenue ramps, customer order timing or inventory turnover could further affect free cash flow performance.Another key risk is Plexus’ dependence on a relatively small group of large customers. The top 10 customers accounted for 54% of revenue in the second quarter of fiscal 2026, up from 52% in the prior quarter and 51% in the year-ago period. This concentration exposes the company to customer-specific risks, as the loss of a major customer or project could negatively impact financial results. Additionally, Plexus provides most of its manufacturing services on a turnkey basis, which requires higher investment levels and increases operational and execution risks within a highly competitive industry.FLEX vs. PLXS Share Price PerformanceOver the past six months, FLEX shares have gained 138%, while Plexus has soared 85.8%.Image Source: Zacks Investment ResearchValuation for FLEX & PLXSIn terms of Price/Book, FLEX shares are trading at 10.77X, higher than PLXS’ 5.15X.Image Source: Zacks Investment ResearchHow Do Estimates Compare for FLEX & PLXS?Analysts have significantly revised their earnings estimates upward for FLEX’s bottom line for the current year.Image Source: Zacks Investment ResearchFor PLXS, there have been upward revisions for the current year.Image Source: Zacks Investment ResearchFLEX or PLXS: Which Stock to Bet On?While FLEX sports a Zacks Rank #1 (Strong Buy) at present, PLXS has a Zacks Rank #4 (Sell). Consequently, in terms of Zacks Rank and valuation, FLEX seems to be a better pick at the moment.You can see the complete list of today’s Zacks #1 Rank stocks here.Beyond Nvidia: AI's Second Wave Is HereThe AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.See Stocks Now >>This article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks