Benchmark (BHE)

Electronics manufacturing services provider Benchmark (NYSE:BHE) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 3.5% year on year to $680.7 million. The company expects next quarter’s revenue to be around $695 million, close to analysts’ estimates. Its non-GAAP profit of $0.62 per share was 8.1% above analysts’ consensus estimates.

Company Overview

Operating as a critical behind-the-scenes partner for complex technology products since 1979, Benchmark Electronics (NYSE:BHE) provides advanced manufacturing, engineering, and technology solutions for original equipment manufacturers across aerospace, medical, industrial, and technology sectors.

The sector could see higher demand as the prevalence of advanced electronics increases in industries such as automotive, healthcare, aerospace, and computing. The high-performance components and contract manufacturing expertise required for autonomous vehicles and cloud computing datacenters, for instance, will benefit companies in the space. However, headwinds include geopolitical risks, particularly U.S.-China trade tensions that could disrupt component sourcing and production as the Trump administration takes an increasingly antagonizing stance on foreign relations. Additionally, stringent environmental regulations on e-waste and emissions could force the industry to pivot in potentially costly ways.

Benchmark Electronics competes with other electronics manufacturing services providers including Celestica (NYSE:CLS), Flex (NASDAQ:FLEX), Jabil (NYSE:JBL), Plexus (NASDAQ:PLXS), and Sanmina (NASDAQ:SANM).

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years.

With $2.61 billion in revenue over the past 12 months, Benchmark is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the bright side, it can still flex high growth rates because it’s working from a smaller revenue base.

As you can see below, Benchmark’s sales grew at a decent 5.1% compounded annual growth rate over the last five years. This shows its offerings generated slightly more demand than the average business services company, a useful starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. Benchmark’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 5.1% over the last two years.

This quarter, Benchmark reported modest year-on-year revenue growth of 3.5% but beat Wall Street’s estimates by 2.9%. Company management is currently guiding for a 5.8% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 6.6% over the next 12 months, an improvement versus the last two years. This projection is above the sector average and suggests its newer products and services will catalyze better top-line performance.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Benchmark was profitable over the last five years but held back by its large cost base. Its average operating margin of 3.7% was weak for a business services business.

On the plus side, Benchmark’s operating margin rose by 1.2 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q3, Benchmark generated an operating margin profit margin of 3.5%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Benchmark’s EPS grew at an astounding 21.2% compounded annual growth rate over the last five years, higher than its 5.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Benchmark’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Benchmark’s operating margin was flat this quarter but expanded by 1.2 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Benchmark, its two-year annual EPS growth of 5.4% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, Benchmark reported adjusted EPS of $0.62, up from $0.57 in the same quarter last year. This print beat analysts’ estimates by 8.1%. Over the next 12 months, Wall Street expects Benchmark’s full-year EPS of $2.30 to grow 10.2%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Benchmark broke even from a free cash flow perspective over the last five years, giving the company limited opportunities to return capital to shareholders.

Benchmark’s free cash flow clocked in at $25.11 million in Q3, equivalent to a 3.7% margin. This cash profitability was in line with the comparable period last year and above its five-year average.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Benchmark historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7.7%, somewhat low compared to the best business services companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, Benchmark’s ROIC averaged 1.1 percentage point increases over the last few years. This is a good sign, and we hope the company can continue improving.

Benchmark reported $286.1 million of cash and $318.2 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $150.8 million of EBITDA over the last 12 months, we view Benchmark’s 0.2× net-debt-to-EBITDA ratio as safe. We also see its $9.07 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing Benchmark beat analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock remained flat at $43 immediately after reporting.

Updated: December 4, 2025 at 10:43 PM EST

Before deciding whether to buy Benchmark or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Benchmark’s business quality ultimately falls short of our standards. Although its revenue growth was decent over the last five years and Wall Street believes it will continue to grow, its low free cash flow margins give it little breathing room. And while the company’s astounding EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its operating margins reveal poor profitability compared to other business services companies.

Benchmark’s P/E ratio based on the next 12 months is 19.2x. Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $47.33 on the company (compared to the current share price of $46.80).