Sanmina Corp (NASDAQ:SANM): A Prime GARP Stock with Strong Growth and a Reasonable Price

For investors looking to balance the search for growth with some caution, the Growth at a Reasonable Price (GARP) method presents a solid middle path. This method tries to find companies that are increasing their earnings faster than normal, but whose stock prices are not too high. It sidesteps the speculation of pure growth stocks and the possible lack of progress in some value stocks. Looking for stocks with good growth scores, acceptable business strength and earnings, and a fair price score can find companies matching this "affordable growth" idea. One company currently found by this process is Sanmina Corp (NASDAQ:SANM).

A Look at Price and Growth

The main idea of the GARP method depends on locating a good mix between a company's growth path and its stock price. Sanmina’s basic report shows a solid view on both parts, receiving a Price score of 7 and a Growth score of 7.

Regarding price, different numbers indicate the stock is not too costly compared to its future:

• Its Price/Forward Earnings number of 14.76 is seen as fair and is lower than both the wider S&P 500 average and a large portion (86.29%) of similar companies in the Electronic Equipment, Instruments & Components field.
• The stock also seems well-priced using cash flow and business value, with 85.48% of field competitors having a higher Price/Free Cash Flow number.
• Maybe most key for growth-focused investors, the small PEG Number shows the stock’s current price could be a good value when considering its predicted earnings increase.

The growth forecast for Sanmina is particularly strong, especially for the future:

• The company is predicted to increase its Earnings Per Share (EPS) by 38.62% each year in the next few years.
• In the same way, Income is forecast to rise by 39.83% per year.
• This marks a clear step up from its past growth speeds, hinting the company might be starting a period of larger increase. For a GARP method, this future growth possibility is essential, as it supplies the basic reason for anticipating a higher stock price.

Additional Basics: Earnings and Business Strength

While price and growth are the main filters, the "affordable growth" method also needs acceptable basic business quality. This is where earnings and business strength are important, serving as checks to confirm the growth is lasting and not on weak ground. Sanmina gets a 7 for Earnings and a 6 for Strength.

Earnings positives consist of:

• Steady past earnings and good operating cash flow over the last five years.
• Good returns on capital, with a Return On Invested Capital (ROIC) of 9.97% that is better than 83.87% of field rivals.
• Getting better margins, with both Profit Margin and Operating Margin showing upward moves in recent years.

Business Strength shows a varied but controlled view:

• The company displays low need for borrowed money, with a careful Debt/Equity number of 0.12.
• Its Debt to Free Cash Flow number is a very good 0.63, showing it could pay all debt with under a year's cash flow, pointing to strong debt handling.
• The primary point to see is cash availability; the Current and Quick ratios, while enough for short-term needs, are below many field competitors. This is something for investors to watch but is offset by the good overall debt numbers.

Why These Points Are Important for Affordable Growth

Combining these four scores, Growth, Price, Earnings, and Strength, makes a complete filter. Good Growth finds the chance. A fair Price makes sure an investor does not pay too much for that chance. Solid Earnings implies the growth is creating actual profit and is run well. Sufficient Business Strength shows the company has the firmness to handle difficulties and pay for its increase. Sanmina’s outline, which displays good price numbers combined with speeding up predicted growth, backed by acceptable earnings and satisfactory business strength, makes it a clear case of a stock that meets this multi-point check.

For investors wanting to see other companies that fit similar "Affordable Growth" points, you can view the full screening results here.

A complete look at Sanmina’s basic scores is in its full basic analysis report.

---

Disclaimer: This article is for information only and is not financial advice, a suggestion, or a bid to buy or sell any securities. The study uses basic scores and information, which can change. Investors should do their own checking and think about their personal money situation before any investment choices.