Companies built for the new economy should be a bullish target for investors in these times of high volatility, and the latest flood of new fundamentals from Q1 earnings reports has highlighted some winners. It’s time to add a next-gen industrial game to your portfolio as nations seek to bring operations home (economic independence through reversal globalization).
Jabil JBL, a leading manufacturer of highly diversified new economy partners, is perfectly positioned for this offshoring push.
JBL’s incredible buoyancy amid the latest spike in market volatility illustrated a high level of bullish sentiment in the name.
Jabil has shown expanding margin growth throughout the pandemic, which is expected to accelerate in the post-pandemic world as demand for its large portfolio of forward-looking international manufacturing operations enables it to take a dominant position in the context of the imminent digital renaissance of the beginning 4and Industrial Revolution.
Accelerating nationalization in the face of the Russian-Ukrainian war, years of pandemic-fueled digital adaptation, JBL’s breakout above its 50- and 200-day moving average, and increasingly bullish estimates analysts following an explosive earnings report in the back half of last week, JBL shares are a ripe new economic game for your future-focused portfolio.
JBL is a Zacks Rank #1 (Strong Buy) with every hedge analyst calling the stock a Strong Buy today, with price targets narrowly centered around $80 per share.
Let’s dive into this new economy investment opportunity.
Jabil is a multinational manufacturing giant that not only provides best-in-class manufacturing capabilities, but also engineering and design expertise, as well as best-in-class sourcing/supply chain knowledge that would benefit any business in the midst of this global resource shortage. This conglomerate is present on 100 sites in 30 different countries, with 260,000 employees (creating local jobs on each specialized site).
Jabil has proven itself as a secular growth story for the past 5 years now, having delivered year-over-year revenue growth for the past 22 consecutive quarters (and expected to continue).
This company’s operations have apparently been unaffected by the wrath of the pandemic, as this exceptionally flexible manufacturer appears to have benefited only from the tailwind of digitization that this devastating virus has serendipitously generated.
Jabil’s highly diversified manufacturing services portfolio has hedged its operations against most broader market risks with defined end markets which have been divided into 2 segments.
Diversified Manufacturing: Healthcare and Packaging, Connected Devices, Mobility, and Automotive and Transportation.
Electronics manufacturing: 5G wireless and cloud, industrial and semiconductor, digital printing and retail, and networking and storage.
These complementary segments have experienced reliable growth and steadily increasing margins, indicating a level of operational excellence that only a top management team would be able to achieve.
After an abbreviated 10-week correction to kick off 2022, JBL is back in the running following its quarterly bid driving report in mid-March. Jabil easily beat analyst EPS estimates for the 8and successive quarter while providing bullish guidance for the current quarter.
JBL is trading at a forward P/E investment of 7.7x, its lowest multiple since the depths of pandemic selling two years ago.
This stock also has a PEG (P/E adjusted for growth) of 0.6x, which is a significant discount to JBL’s 5-year median and the industry average, anything below 1x signifying a potential value.
JBL has been an exceptionally stable next-gen industrial engine since the start of 2022 and has generated rising alpha (vs. the S&P 500). JBL’s exceptional second-quarter (February quarter) fiscal report released in mid-March has given the tech-savvy manufacturer a market edge that investors have yet to fully price in.
JBL’s incredible resilience to broader market selling pressures this month, trading in a bound fib last month around $55-$60 per share (see below). indicates just how much pent-up bullish demand there is for these stocks, and rightly so with this sell-off discount.
Image source: TradingView
Jabil isn’t a sexy company or stock to trade for that matter, but at this level of valuation coupled with its accelerating secular growth spending, it represents a solid, fundamental-driven investment opportunity.
JBL shares haven’t traded so strongly since the peak of the Dotcom bubble in September 2000, but this time the company has a proven track record of secular growth (expanding revenue during the pandemic) and is 7 times cheaper from a P/E multiple base.
The US stock market is the safest place to hold your capital in this highly inflationary rising rate environment (rapidly devaluing cash) (weakening bond values) while earnings growth continues with strong economic demand which remains dynamic. The valuation multiples of many new normal stocks have finally fallen to fair levels.
With modeled intrinsic valuation denominators (i.e. corporate discount rates) now in line with (if not exceeding) interest rate expectations, while estimates earnings point to outsized growth in the coming quarters, many recently discounted US stocks look ripe for the picking.
Jabil is designed for this new, highly adaptable and rapidly digitizing economy. It’s time to consider adding JBL to your portfolio as a next-gen manufacturing game as analysts raise estimates.
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