This quarter, Sanmina reported year-on-year revenue growth of 7%, and its $2.01 billion of revenue exceeded Wall Street’s estimates by 1.5%. Company management is currently guiding for a 6.3% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 8.4% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and suggests its newer products and services will fuel better top-line performance.

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Operating Margin

Sanmina was profitable over the last five years but held back by its large cost base. Its average operating margin of 4.5% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Analyzing the trend in its profitability, Sanmina’s operating margin might have seen some fluctuations but has generally stayed the same over the last five years, which doesn’t help its cause.

In Q4, Sanmina generated an operating profit margin of 4.4%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sanmina’s EPS grew at a solid 10% compounded annual growth rate over the last five years, higher than its flat revenue. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t expand.

Diving into the nuances of Sanmina’s earnings can give us a better understanding of its performance. A five-year view shows that Sanmina has repurchased its stock, shrinking its share count by 23.1%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Sanmina, its two-year annual EPS declines of 1.4% mark a reversal from its (seemingly) healthy five-year trend. We hope Sanmina can return to earnings growth in the future.

In Q4, Sanmina reported EPS at $1.44, up from $1.30 in the same quarter last year. This print beat analysts’ estimates by 5.1%. Over the next 12 months, Wall Street expects Sanmina’s full-year EPS of $5.42 to grow 15.8%.

Key Takeaways from Sanmina’s Q4 Results

It was good to see Sanmina narrowly top analysts’ revenue expectations this quarter. We were also happy its EPS outperformed Wall Street’s estimates. On the other hand, its revenue and EPS guidance for next quarter fell short of Wall Street’s estimates. Overall, this quarter was mixed. The stock traded up 2.5% to $80.60 immediately after reporting.

Should you buy the stock or not? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free .