I think there's a trend here.
Electronics manufacturing service Flextronics International
Those stocks I just mentioned all made another little jump in today's early trading, presumably thanks to the very demand trend I just described. The stocks have fallen throughout the day, which shouldn’t be read into too much; the group has been on a tear in recent months, and Flextronic is still up more than 30% since late October.
Flextronics reported 19% stronger sales and 47% higher non-GAAP earnings, both year-over-year. The company's return on invested capital (ROIC) stands at a record 33.6%. And it's all thanks to an "overall healthy business environment" with particular strength in the mobile and automotive products segments.
The mobile boost was mainly a seasonal phenomenon and will fall back again now that the holidays are over. But the overall high demand for electronics is not likely to go away anytime soon, as long as you allow for some seasonal adjustments.
All that said, I'm not sure that Flextronics stands out as a particularly promising investment amongst its peers. The business model runs on thin margins even for this tight-belted industry, because the company aims for high sales volume. The more margin-minded TTM Technologies always struck me as a safer investment because the greater margin of safety around the bottom line shields the company from short-term disasters.
Flextronics is a giant in its industry and surely large enough to withstand a few storms of its own, but then I'd like to see the company take better advantage of salad days like these. The net margin did improve over the year-ago quarter but remained a very modest 2.4%. Even notoriously low-margin Jabil Circuit did better than that in its comparable report.
Add Flextronics to your Foolish watchlist. Maybe you'll find more to cheer about in coming quarters.
Fool contributor Anders Bylund holds no position in any of the companies discussed here. TTM Technologies is a Motley Fool Stock Advisor pick. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.