Jabil Inc (JBL, Financial) recently experienced a daily loss of 3.6%, and while it has seen a modest 3-month gain of 1.4%, the stock's current price of $124.93 per share is a point of contention for value investors. The company boasts a robust Earnings Per Share (EPS) (EPS) of 11.65, but the critical question remains: is Jabil significantly overvalued? This article aims to provide investors with a comprehensive valuation analysis of Jabil, exploring whether its current market price truly reflects its intrinsic value.
Company Overview
Jabil Inc (JBL, Financial), a powerhouse in manufacturing services and solutions, operates through two segments: Electronics Manufacturing Services (EMS) and Diversified Manufacturing Services (DMS). The company's extensive design, production, and product management services cater to a diverse range of industries and end markets. With a market cap of $15.10 billion and sales reaching $32.10 billion, Jabil's financials are substantial. However, when juxtaposed with the GF Value of $76.21, the stock appears to be significantly overvalued. This valuation discrepancy sets the stage for a deeper examination of Jabil's worth.
Understanding the GF Value
The GF Value is a proprietary metric that estimates a stock's intrinsic value, incorporating historical trading multiples, an adjustment factor based on past performance and growth, and future business performance forecasts. If Jabil's stock price hovers significantly above the GF Value Line, it suggests overvaluation and potentially lower future returns. Conversely, a price well below the line could indicate undervaluation and the potential for higher returns. Presently, Jabil's stock price indicates a significant overvaluation, which may result in diminished long-term returns despite the company's future business growth.
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Financial Strength
Investing in companies with robust financial strength is crucial to avoid permanent capital loss. Jabil's cash-to-debt ratio of 0.79 ranks below the median for the Hardware industry, yet its financial strength has earned a respectable 7 out of 10 from GuruFocus. This rating reflects a fair balance sheet, which is a vital factor for investors to consider.
Profitability and Growth
Consistent profitability and growth are key indicators of a company's investment potential. Jabil has maintained profitability over the past decade, with a 4.91% operating margin that outperforms more than half of its industry peers. Furthermore, the company's revenue growth rate of 13.3% and 3-year average EBITDA growth of 30.5% position Jabil favorably within the Hardware industry, reflecting strong growth prospects.
ROIC vs. WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) provides insight into its value creation efficiency. Jabil's ROIC of 15.67% significantly exceeds its WACC of 9.7%, indicating the company's effective capital allocation and value generation for shareholders.
Conclusion
In summary, despite Jabil's strong financial condition, profitability, and growth, the stock is currently significantly overvalued according to the GF Value. Investors interested in Jabil should closely monitor the stock for potential pricing corrections that align more closely with its intrinsic value. For more detailed financial insights, Jabil's 30-Year Financials can be reviewed here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
