Jabil Circuit, Inc. (JBL) shares were trading around $23 in August, but the correction in many technology stocks has helped to take this stock down to just about $17. While some tech companies are seeing an impact from slow demand for PC sales, other tech companies that do business with Apple (AAPL) are doing well as tablets like the iPad take an increasing share of the PC market. That's why it makes sense to focus on companies that are benefiting from strong tablet and mobile device sales. Since Jabil Circuit provides design and manufacturing services to companies like Apple, it may not deserve to have a stock that is trading near 52-week lows. Here are a few reasons to consider buying this stock while it is still cheap:
1) As mentioned before, while some parts of the PC industry has been weak, that can be offset for Jabil Circuit due to strong growth being seen by companies like Apple. Also, Jabil Circuit is diversified and provides manufacturing services to a range of industries outside of the PC industry such as aerospace, healthcare, automotive, industrial and others.
2) Companies are always looking for ways to save money and one solution is to outsource some or all of the manufacturing process. With the economy remaining lackluster, it makes sense for companies to use Jabil Circuit for design, manufacturing, supply chain management, and distribution rather than investing in the this on their own since it requires heavy levels of capital expenditures.
3) The Apple iPhone 5 has been very popular since it was introduced
just weeks ago. It has been reported that Jabil Circuit is supplying
parts for the iPhone 5 which means it is likely to benefit from the
continued growth of this and possibly future iPhone models.
4) Insider buying can be a buy signal for other investors since directors and officers tend to know their companies best. On October 19, 2012, a director named Martha Brooks bought 10,000 shares, in a transaction valued at $171,303. The board of directors also seems to feel the stock is undervalued as it recently authorized the repurchase of up to $100 million worth of shares of the company's common stock in the next twelve months.
With this stock trading for just about 6 times earnings estimates for 2013, it looks deeply undervalued considering that the average stock in the S&P 500 Index trades at around 14 times earnings. It also offers investors a dividend yield of nearly 2%, which will pay shareholders to wait for a higher stock price. The insider buying and company stock buy back program are additional signs that the market is undervaluing this tech stock.
Here are some key points for JBL:
Current share price: $17.28
The 52 week range is $16.82 to $27.40
Earnings estimates for 2012: $2.55
Earnings estimates for 2013: $2.93
Annual dividend: 32 cents per share which yields 1.9%
Data is sourced from Yahoo Finance. No guarantees or representations
are made. Hawkinvest is not a registered investment advisor and does
not provide specific investment advice. The information is for
informational purposes only. You should always consult a financial
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.