With a daily loss of 11.82% and a negligible 3-month gain of -0.08%, value investors might question if Jabil Inc (JBL, Financial) is poised for a rebound or if its current market price is justified. The company's Earnings Per Share (EPS) stands at 6, yet the stock is deemed Significantly Overvalued according to GuruFocus Value. This analysis aims to delve into Jabil's valuation to determine if the market's pricing is in line with its intrinsic value.
Company Introduction
Jabil Inc (JBL, Financial), a prominent player in the manufacturing services sector, offers a comprehensive suite of electronics design, production, and product management services across various industries. With a stark contrast between the current stock price of $115.24 and the GF Value of $77.96, a thorough valuation assessment is imperative to ascertain the true worth of Jabil. This exploration will blend financial scrutiny with key insights into the company's operations, providing a holistic view of its valuation.
Summarize GF Value
The GF Value is a unique metric that encapsulates the intrinsic value of a stock, factoring in historical trading multiples, a GuruFocus adjustment for past performance, and projected business growth. It suggests a fair trading value for the stock, which serves as a benchmark for investors. When Jabil's stock price exceeds the GF Value Line, it indicates an overvaluation, signaling potential underperformance in the future. Conversely, a stock price below the GF Value Line may lead to higher returns. With Jabil's market cap at $13 billion and a significant deviation from its GF Value, the stock appears to be substantially overvalued.
Because Jabil is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth.
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Financial Strength
Assessing a company's financial strength is crucial before investing in its stock. Jabil's cash-to-debt ratio of 0.56 ranks lower than most of its peers in the Hardware industry, placing it in a precarious position compared to 69.52% of 2336 companies. However, with an overall financial strength rating of 7 out of 10, Jabil's financial health is considered fair.
Profitability and Growth
Investing in profitable companies like Jabil, which has maintained profitability for 10 out of the past 10 years, typically carries less risk. A higher profit margin often indicates better performance potential. Jabil's operating margin of 4.59% outperforms 53.13% of its industry counterparts, underscoring its robust profitability. Additionally, Jabil's revenue and EBITDA growth rates surpass those of a majority of companies in the Hardware industry, highlighting its strong growth prospects.
ROIC vs WACC
Comparing Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) is another effective measure of profitability. Jabil's ROIC of 12.87 exceeds its WACC of 10.82, indicating the company's efficient capital utilization and value creation for shareholders.
Conclusion
In summary, despite Jabil's fair financial condition and strong profitability, the stock is currently significantly overvalued. The company's growth outshines 77.16% of the companies in the Hardware industry. For an in-depth look at Jabil's financials, one can examine its 30-Year Financials 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.
