Jabil Circuit: A Tech Bargain?

Jabil Circuit (NYSE:JBL) closed March 20, 2008 at $11.58.

52-week range: $11.49 [Mar. 20, 2008] - $26.18 [Mar. 21, 2007]

Yield = 2.41%

JBL is a major supplier of turnkey manufacturing services for circuit board assemblies. They sell to PC, computer peripheral, communications and automotive industries. FY 2007 [ended August 2007] sales were an all-time record at $12.277 billion.

EPS were down to $0.81 in FY 2007 versus $1.19 in FY 2006. However the latest two quarters showed nice year-over-year gains. August’s 4Q report was $0.25 v. $0.17 and November saw quarterly EPS of $0.35 v. $0.30. For the current FY the consensus view is now at $1.13 /share or up 39% from the depressed level of 2007.

Like most technology stocks, Jabil progress has been inconsistent. Long-term though, it has shown great growth. In the 10 years just completed:

What makes Jabil so exciting right now?

These shares hit a new 6-year low Thursday and closed below the lows in any year since 2002’s horrendous bear market. At today’s price JBL trades at just 10.25x this fiscal year’s estimates and < 7.7x the FY 2009 view of $1.51/share.

JBL’s current P/E, price/cash flow, and price/book value are the lowest ever. Previous periods when its valuation was even close to these levels were in late 1998 [the Asian Contagion/Long Term Capital Management crisis period] and in late 2002. Jabil’s share price action went from $5.80 to $68.00 from 1998’s low to 2000’s high. Buyers of JBL in October of 2002 saw their shares climb from a [split-adjusted] $11.10 to $32.40 over the next 16 months.

The balance sheet looks good. As of last FY’s close they had just 13% LT debt with total interest coverage of 15.9x.

Jabil’s 10-year median P/E has been 28x and Value Line assumes a 22 multiple for their 3 – 5 year outlook. Even 16 times calendar year estimates of $1.30 would bring JBL shares back to around $20.80 or up 79% from Friday’s quote.

Is that target price crazy? JBL shares have actually traded at $26.80 and higher at some point in each year since 1999. From the current multi-year low point JBL’s risk/reward appears very good right now.

Conclusion: Jabil Circuit offers a cheap technology play with well defined upside and a 2.41% yield [as good as most money markets] while you wait.

Disclosure: Author owns shares and is short puts on JBL.

Comments

[CliffA42:]

Agreed!

2008 Mar 25 12:37 AM

[Paul Price:]

JBL Jabil Circuit Inc.

TIMOTHY L President & CEO Bought 50,000 shares @$9.22
on March 28, 2008 for $461,000.

2008 Apr 04 10:58 PM

[Paul Price:]

New Value Line on Jabil Circuits - JBL
Date: April 7, 2008 12:11 PM


In the new Value Line [dated April 11 but released on-line today] they see JBL earning $1.05 in the FY ending August and around $1.11 in the calendar year.

Value Line is assuming a 'normalized' P/E for Jabil of 17.5x in arriving at their 3 - 5 year target price range of $25 - $40.

The CEO recently bought $461,000 of shares on the open market after the stock dipped to $9.22 following the latest earnings report.

A 17.5 multiple on the CY estimate of $1.11 leads to a $19.42 year-end 2008 target or up over 90% from the current quote of $10.20 [@12:08 PM].

Jabil Circuit shares have actually traded between $18 - $43 at their peaks in each of the 11 years 1997 through 2007.

2008 Apr 07 12:14 PM