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Jabil currently trades at $164.60 and has been a dream stock for shareholders. It’s returned 465% since May 2020, blowing past the S&P 500’s 97.3% gain. The company has also beaten the index over the past six months as its stock price is up 25.5% thanks to its solid quarterly results.
Is there a buying opportunity in Jabil, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Jabil Not Exciting?
We’re happy investors have made money, but we're swiping left on Jabil for now. Here are three reasons why we avoid JBL and a stock we'd rather own.
1. Long-Term Revenue Growth Flatter Than a Pancake
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Jabil struggled to consistently increase demand as its $27.45 billion of sales for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and signals it’s a lower quality business.
2. EPS Growth Has Stalled Over the Last Two Years
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
Jabil’s flat EPS over the last two years was weak. On the bright side, this performance was better than its 11.6% annualized revenue declines.
3. Mediocre Free Cash Flow Margin Limits Reinvestment Potential
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.
Jabil has shown weak cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.1%, subpar for a business services business.
Final Judgment
Jabil isn’t a terrible business, but it doesn’t pass our bar. With its shares topping the market in recent months, the stock trades at 17.2× forward P/E (or $164.60 per share). Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now. Let us point you toward one of our all-time favorite software stocks.
Stocks We Would Buy Instead of Jabil
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