Jabil (JBL): Buy, Sell, or Hold Post Q3 Earnings?

Jabil currently trades at $212.29 and has been a dream stock for shareholders. It’s returned 437% since December 2020, blowing past the S&P 500’s 85.5% gain. The company has also beaten the index over the past six months as its stock price is up 22.7% thanks to its solid quarterly results.

Is there a buying opportunity in Jabil, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free for active Edge members.

Why Is Jabil Not Exciting?

Despite the momentum, we're sitting this one out for now. Here are three reasons why JBL doesn't excite us and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Unfortunately, Jabil’s 1.8% annualized revenue growth over the last five years was sluggish. This was below our standards.

2. Recent EPS Growth Below Our Standards

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 EPS grew at an unimpressive 6.5% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 7.3% annualized revenue declines and tells us management adapted its cost structure in response to a challenging demand environment.

3. Mediocre Free Cash Flow Margin Limits Reinvestment Potential

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

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’s business quality ultimately falls short of our standards. With its shares beating the market recently, the stock trades at 18.9× forward P/E (or $212.29 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at our favorite semiconductor picks and shovels play.

Stocks We Would Buy Instead of Jabil

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