Celestica vs. Flex: Which EMS Stock Has Better Growth Potential?

Celestica Inc. CLS and Flex Ltd. FLEX are two leading players in the electronics manufacturing services (EMS) industry. Celestica is one of the largest EMS companies in the world, primarily serving original equipment manufacturers, cloud-based and other service providers, and business enterprises across several industries. It offers a comprehensive range of manufacturing and supply-chain solutions that support various customer requirements, from low-volume, high-complexity custom products to high-volume commodity products.On the other hand, Singapore-based Flex offers advanced manufacturing solutions to customers through a wide array of services, including design and engineering, component services, rapid prototyping, fulfillment and circular economy solutions. The company has also expanded its service offerings in software, robotics, artificial intelligence (AI), factory automation, simulation, digital twins and other emerging technologies.With domain-specific expertise in core areas, both Celestica and Flex are strategically positioned in the EMS landscape, serving similar markets such as cloud computing, automotive, healthcare and industrials. Let us delve a little deeper into the companies’ competitive dynamics to understand which of the two is relatively better placed in the industry.The Case for CelesticaWith more than 25 years of experience in manufacturing, backed by a simplified and optimized global network, Celestica is committed to delivering next-generation, cloud-optimized data storage and industry-leading networking solutions to help customers balance performance, power efficiency and space as technologies evolve. The company had benefited from the ongoing generative AI boom, thanks to the solid demand trends for AI/ML (machine learning) compute and networking products from hyperscale customers.Celestica is benefiting from the 800G family of network switches, which are vital for data centers that power AI applications and storage solutions like the SC6100 controller and SD6200 platform (which provide efficient and scalable data storage for AI). This transformational solution offers a foundational technology to advance AI while maintaining scalable, sustainable and profitable business models. The data center switches combined with optical transceivers have the potential to handle and sustain high volumes of both inbound and outbound network traffic and cater to the demand for data center bandwidth for supporting AI/ML and data analytics applications. These state-of-the-art products have translated into solid top-line growth in recent years.However, the company remains plagued by margin woes. Celestica’s products are highly sophisticated and typically based on the latest technological innovations, which have historically led to high research and development costs. High operating expenses have contracted margins. Moreover, Celestica faces stiff competition from industry giants like Foxconn, Jabil Inc. JBL and Sanmina Corporation SANM. The highly cyclical nature of the semiconductor industry further remains an overhang, particularly in the aftermath of reciprocal tariffs.The Case for FlexWith a diverse workforce across 30 countries, Flex is well-positioned to cater to the evolving demands arising from the proliferation of the Internet of Things (IoT), autonomous/connected cars, industrial automation, augmented & virtual reality (AR/VR) and 5G technologies. The company’s technology and vertical integration capabilities serve many applications, like hyperscale data centers, renewables and next-generation mobility. Strategic initiatives undertaken by the company are driving growth across multiple business verticals.In fiscal 2025, Flex’s cloud and data center power business expanded 50% from the prior-year period. The company continues to anticipate strong growth in the cloud and data center power business in fiscal 2026. Its innovative suite of power products and services enhances customer satisfaction. All these factors favorably position Flex for the AI-powered technology shift prevalent in the industry, from grid to chip and from the cloud to the edge. However, Flex operates in a highly competitive environment, facing competition from both domestic and international electronic manufacturers, manufacturing service providers and designers like Jabil and Sanmina. The tense geopolitical situation between the United States and China and the wars in Europe and the Middle East remain headwinds. Against the backdrop of this global uncertainty, low demand in some consumer-centric markets is negatively impacting its margins.How Do Zacks Estimates Compare for CLS & FLEX?The Zacks Consensus Estimate for Celestica’s 2025 sales and EPS implies year-over-year growth of 13.1% and 30.1%, respectively. The EPS estimates for 2025 have been trending northward over the past 60 days.Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for Flex’s 2025 sales implies a year-over-year rise of 0.4%, while that of EPS suggests growth of 9.4%. The EPS estimates for 2025 have been trending northward over the past 60 days.Image Source: Zacks Investment ResearchPrice Performance & Valuation of CLS & FLEXOver the past year, Celestica has gained 119.8% compared with the industry’s growth of 51.7%. Flex has gained 36.6% over the same period.Image Source: Zacks Investment ResearchFlex looks more attractive than Celestica from a valuation standpoint. Going by the price/earnings ratio, Flex’s shares currently trade at 14.49 forward earnings, lower than 22.72 for Celestica.Image Source: Zacks Investment ResearchCLS or FLEX: Which is a Better Pick?While Celestica carries a Zacks Rank #3 (Hold), Flex has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Both Celestica and Flex expect sales and profits to improve in 2025. Celestica has shown sharp revenue and EPS growth over the years, while Flex has been facing a topsy-turvy road. Celestica boasts a better price performance, but Flex’s valuation metrics appear comparatively more attractive. However, based solely on the Zacks Rank, Flex is relatively better placed than Celestica. Hence, Flex seems to be a better investment option at the moment.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Jabil, Inc. (JBL): Free Stock Analysis Report Flex Ltd. (FLEX): Free Stock Analysis Report Celestica, Inc. (CLS): Free Stock Analysis Report Sanmina Corporation (SANM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks