Flex CFO's Partial Share Sale Highlights Overvaluation Risks Amid Rich Valuation

What happened

Flex CFO Kevin Krumm sold 21,406 shares at $61.23 each on January 7, 2026, realizing approximately $1.31 million. Following this transaction, Krumm retains 143,803 shares, indicating a reduced but still significant ownership stake. This sale occurs as Flex's stock has surged about 65% over the past year, pushing it to a premium valuation with a trailing P/E of 27.6x and EV/EBITDA of 14.4x. The DeepValue report notes the stock trades roughly 74% above its intrinsic value based on free cash flow, signaling overvaluation in a thin-margin, cyclical industry. With ongoing geopolitical risks and competitive pressures, the CFO's move underscores caution as fundamentals may not support current price levels.

Implication

The CFO's share sale suggests insider profit-taking after a sharp price run-up, aligning with the DeepValue report's overvaluation concerns. Flex's rich multiples, such as P/E and EV/EBITDA, lack a margin of safety given the stock's 74% premium to intrinsic value based on free cash flow. Thin net margins around 3% and exposure to geopolitical shocks, like the Ukraine facility strike, heighten earnings volatility and downside risk. The EMS industry remains highly competitive and cyclical, limiting durable margin expansion and making sustained cash flow improvements uncertain. Consequently, investors should consider reducing exposure or waiting for a valuation reset before adding positions, as current levels offer limited downside protection.

Thesis delta

The CFO's share sale reinforces the DeepValue report's 'POTENTIAL SELL' stance but does not fundamentally shift the investment thesis. It provides additional evidence that insiders are taking profits at elevated prices, highlighting overvaluation risks in a stock that has already re-rated sharply. However, since Krumm retains a meaningful stake, it is not a full bearish signal but rather a prudent reduction that underscores the need for caution amid rich valuations.