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3 Reasons to Sell PLXS and 1 Stock to Buy Instead

By: StockStory

April 09, 2025 at 05:14 AM EDT

PLXS Cover Image

Plexus has followed the market’s trajectory closely. The stock is down 18.5% to $110.51 per share over the past six months while the S&P 500 has lost 13.7%. This might have investors contemplating their next move.

Is now the time to buy Plexus, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.

Despite the more favorable entry price, we're swiping left on Plexus for now. Here are three reasons why you should be careful with PLXS and a stock we'd rather own.

Why Is Plexus Not Exciting?

With over 20,000 team members across 26 global facilities, Plexus (NASDAQ: PLXS) designs, manufactures, and services complex electronic products for companies in aerospace/defense, healthcare, and industrial sectors.

1. Long-Term Revenue Growth Disappoints

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, Plexus’s sales grew at a tepid 4% compounded annual growth rate over the last five years. This was below our standard for the business services sector. Plexus Quarterly Revenue

2. Recent EPS Growth Below Our Standards

Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.

Plexus’s EPS grew at a weak 3.9% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 1.6% annualized revenue declines and tells us management adapted its cost structure in response to a challenging demand environment.

3. Mediocre Free Cash Flow Margin Limits Reinvestment Potential

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Plexus has shown weak cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.6%, subpar for a business services business.

Plexus Trailing 12-Month Free Cash Flow Margin

Final Judgment

Plexus isn’t a terrible business, but it doesn’t pass our bar. Following the recent decline, the stock trades at 15.1× forward price-to-earnings (or $110.51 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at a safe-and-steady industrials business benefiting from an upgrade cycle.

Stocks We Would Buy Instead of Plexus

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.

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