QS Research · Michael Burry's Scion Capital analyst template · 2006
FLEX LTD. (FLEX)
As of 2026-11-11 · 12/15 boxes filled from SEC filings and market data
Report price $76.09 (close 2026-11-10)
Conclusion: PASS
Conviction low · base case -5% · downside -28% · upside +24%
Flex is a ~5% operating-margin contract manufacturer (TTM operating income $1.57B on $30.95B revenue, N13/N11) whose stock has fallen 54.4% from its 52-week high (N2) even as Q2 FY2027 sales rose 25% and FY2027 guidance was raised to $34.9-35.9B sales and $4.84-5.16 adjusted EPS (S31). The market is not missing the growth; it is discounting the quality of it: ROIC of 12.6% sits below the 13.5% WACC (N46, N47), FCF margin is 2.5% (N41), capex is 39% of EBITDA (N49), and $4.4B of acquisition debt plus a guaranteed SpinCo preferred redemption hang on a spin-off targeted for Q1 2027 (S30). Priced at 25.7x operating P/E (N38) against a peer-median 25.85x that anchors the base at $72.58 (-4.6%, N60), the risk/reward is roughly -27.8% to +24.4%, about 0.88:1, which does not clear the bar for a long. This is a watch: the operating trend is real, but the multiple, the balance sheet and the spin execution leave no margin of safety yet.
Key numbers
- Share price: $76.09
- Market cap: $28.11B
- Latest financial period: TTM to Sep 25, 2026
- Revenue (TTM): $30.95B
- EV / EBITDA (TTM): 14.3x
- P/E (TTM): 27.1x
- FCF yield: 2.8%
- Price / book: 4.84x
- Earnings-quality flags (TTM): none flagged
- P/E, operating (tax-normalized) (TTM): 25.7x
- EV / FCF (TTM): 38.6x
- Revenue growth (latest fiscal year): +8.1%
- ROIC (TTM): 12.6%
- WACC: 13.5%
- Economic profit spread: -0.9 pts
The 15 boxes
- ✓ 1. Long-form business notes
Flex makes most of its money from manufacturing and systems assembly, wrapped in design/engineering, supply-chain, fulfillment/logistics and aftermarket services; the latest 10-K also carves out power, thermal and compute infrastructure. The reportable segments changed from two in FY2021 (FAS/FRS) to three as of March 31, 2026 (ITS/RMS/CPI), and a May 5, 2026 announcement targets a separation of CPI from ITS+RMS in Q1 calendar 2027. XBRL shows revenue $24.12B in FY2021, $27.91B in FY2026 and $30.95B TTM to 2026-09-25, with operating income $795.0M, $1.37B and $1.57B over the same periods. The sources do not give segment profit, unit economics or numeric guidance.
- ✓ 2. Competitive advantage
Flex is a contract manufacturer that competes on cost, site location, supply-chain resiliency and scale rather than on brand, licences or customer lock-in, and the sources say so directly: the market is competitive, it competes with numerous domestic and foreign providers and with its own current and prospective customers, and no customer is over 10% of revenue. The scale is real (more than 100 facilities, ~30 countries, ~150,000 employees, 10 largest customers 45% of FY2026 net sales) but the margin record shows little pricing power: gross margin 9.5% and operating margin 5.1% on the TTM to 2026-09-25, up from 7.0% and 3.3% in FY2021 but still thin. Switching costs look weak by the company's own risk language - no firm long-term purchase commitments, termination for convenience, and customer-dedicated equipment with limited alternative use - and the computed risk-factor diff marks the competition/in-sourcing and customer-specific-equipment risks as new or rewritten in the 2026 10-K.
- ✓ 3. 10-Q takeaways
Q2 FY2027 (three months ended Sep 25, 2026) net sales were $8,491M, up 25% y/y, with CPI up 54% to $2,508M (including $0.1B from the May 1, 2026 EPP acquisition), ITS up 22% and RMS up 9%; GAAP operating margin was 4.9% (vs 4.4%) and adjusted 7.1% (vs 6.0%), with gross margin 9.6% vs 9.0%. Q2 GAAP net income was $263M ($0.70 diluted) against adjusted net income of $443M ($1.18), with $110M of spin-off/acquisition-related expense inside SG&A and a 29% effective tax rate lifted by one-time spin tax impacts. Cash from operations was $501M and free cash flow $261M in the quarter, while inventory rose $1.5B since March 31, 2026; guidance is numeric and raised (Q3 FY2027 sales $8.87–9.17B, adjusted EPS $1.19–1.25; FY2027 sales $34.9–35.9B, adjusted operating margin 7.6–7.8%, adjusted EPS $4.84–5.16).
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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