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TheStreet Open House

Risks Keep a Lid on Sanmina

Editor's note: This Stocks Under $10 alert was originally sent to subscribers April 16 at 2:30 p.m. EDT. It's being republished as a bonus for TheStreet.com and RealMoney.com readers.


When scanning the market for low-priced stocks that can become winners for aggressive investors, it's not difficult to find a number of relatively big tech names that used to be highfliers back in the bubble days.

Sanmina-SCI (SANM) is a good example of an under $10 stock that has a large footprint. With more than 40,000 employees helping to generate almost $11 billion in sales last year, it's somewhat surprising that investors can pick up shares of Sanmina at the bargain-basement price of $3.70.

There are always a number of reasons why a stock trades in the under $10 area, and Sanmina has its share of problems. These issues range from a weak environment for sales growth to a large debt load.

Nevertheless, we have to dig a lot deeper to decide whether the negatives are already priced into the stock, enabling us to potentially make big profits as the company turns itself around.

Given the significant risks associated with many companies in the under $10 space, we need to find stocks that can offer significant returns to compensate for the added risk.

Does Sanmina offer that kind of potential upside? Let's take a closer look.

Sanmina generates its revenue by offering manufacturing and related services to OEMs, or original equipment manufacturers, across a number of industries, including communications, computing and storage, multimedia, consumer-related, industrial, semiconductor and defense/aerospace.

The company is typically referred to as an EMS, or electronics manufacturing services, provider. Sanmina's services span the entire product cycle, from design and engineering through assembly and post-manufacturing needs like shipping and repair services.

Its primary customers range from major players in the computing industry like IBM (IBM), Lenovo and Hewlett-Packard (HPQ) to large and small companies in the communications and IT industries, such as Nokia (NOK) and Alcatel-Lucent (ALU).

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