Flex to Join S&P 500, But Valuation Still Stretched

What happened

Flex Ltd. will be added to the S&P 500 index on June 5, 2026, replacing Campbell's, alongside Marvell Technology. The index inclusion is a positive signal for liquidity and prestige, but the stock already trades at ~28x P/E and ~74% above our FCF-based intrinsic value of $36.64. While the index rebalancing could attract passive inflows, the underlying business faces flat revenues, thin margins (~3% net), and competitive pressures in EMS. The rally of 65% over the past 12 months has discounted much of the good news.

Implication

Investors should consider taking profits on this index inclusion event, as the margin of safety is thin and cyclical risks remain.

Thesis delta

The index addition is a sentiment catalyst but does not alter our structural view that Flex is fairly valued to overvalued. The rich multiple and low fundamental growth provide limited upside from here.