Nvidia‘s the most successful US stock on the S&P 500 over the past decade. Now, I don’t believe the stock I’m about to talk about will be the next Nvidia. It isn’t the kingpin of the artificial intelligence (AI) revolution. But it could experience some Nvidia-like share price growth over the next couple of years.
So why’s that? Well, two reasons. Firstly, it’s cheap, and second, it’s operating in a sector that’s both surging and appears to offer long-term resilience.
The company’s Sanmina Corporation (NASDAQ:SANM). It provides end-to-end manufacturing services for complex electronics and precision components across industries including communications, industrial, defence, automotive, and medical technology.
The company has also positioned itself strategically within AI infrastructure, recently acquiring the ZT Systems data centre manufacturing business from AMD for up to $3bn, significantly enhancing its scale and presence in the fast-growing cloud and AI markets.
It’s now an $8bn company, with a modest net debt position around $1bn.
Why am I so interested?
The first part of my interest is the valuation (pretty much always my starting point). The company trades at 14.5 times forward earnings. This stands out because the sector average is actually around 23.5 times. With that in mind, we can already observe a 38% discount.
But none of this would matter if the company wasn’t growing earnings. And it is. The company is expected to grow earnings by around 25% annually over the medium term.
This leads us to a price-to-earnings-to-growth (PEG) ratio of 0.58. This is a 63% discount to the sector average and potentially suggests that the company is undervalued by more than half.
But, there’s another interesting comparison for me. And that’s with Celestica, a company I invested in over three years ago and have pretty much closed my positions now. It operates in a very similar market to the new-look Sanmina, but there’s a big difference, and that’s the valuation. Celestica’s up 3,083% over five years.
Celestica trades at 32 times forward earnings and has a PEG ratio of 0.72. Still potentially undervalued on a growth-adjusted perspective, but much pricier than Sanmina.
Here’s how the two companies stack up.
| Metric | Celestica 2026 | Celestica 2027 | Sanmina 2026 | Sanmina 2027 |
|---|---|---|---|---|
| Revenue | $17bn | ~$19-20bn | $14bn | $16-17bn |
| EPS | $8.75 | $12.87 | $9.64 | $11.46 |
| Operating Margin | 7.8% | 8.5% | 6% | 6-7% |
While Celestica leads on revenue and margins, Sanmina isn’t far behind. It isn’t clear at all why Celestica trades at more than double Sanmina’s valuation. There’s definitely cause to argue that Sanmina should be trading much higher than it is today — maybe double. And that’s just a near-term misplacing issue.
The real deal?
There’s a lot to like about Sanmina. But investors will want to see whether ZT Systems’ integrations go to plan. Even though the stock looks cheap, it’s had a good run and any setbacks could see it retreat.
Nonetheless, I’m very bullish here, which is why I bought it and think others might consider it too. I feel investors just need some good operational news to really get the stock moving again.
