SANM Still Struggling

Sanmina-SCI Corporation (SANM - Analyst Report) is currently struggling with industry-wide weakness and challenging end-market demand. After exiting its PC business, Sanmina has focused on its core business and margin improvement.

Owing to continuous decline in its market capitalization, the company reported goodwill impairment charge of $482.0 million in 4Q08 in its recently filed 10K. Although Sanmina has reduced its cost structure, top-line growth is sluggish and we believe the company will struggle to grow in 2009. Moreover, we would like to see sustained growth before becoming more positive on the stock. We reiterate our Sell rating on SANM shares with a lower six-month price target of $0.25.

Sanmina-SCI Corporation s shares are currently trading at 8.3x our reduced 2009 EPS estimate of $0.06. On a P/S multiple, the stock is trading at 0.04x our reduced 2009 revenue per share estimate of $11.24. This P/E multiple is well below the industry averages as well as at a discount to some of its closest peers. Sanmina currently targets a 20-8-4 financial model (20% ROIC target, over 8% gross margin target, and over 4% operating margin target).

Read the full analyst report on SANM