If you’re looking to take advantage of the sharp sell off in tech stocks this year and want to buy shares of a solid company on the cheap, then Jabil (JBL 1.85%) should be on your radar.
The contract electronics maker released an impressive set of results on September 27. Jabil’s fiscal 2022 fourth quarter results (for the three months ended Aug. 31) crushed analysts’ expectations by a nice margin.
Jabil’s advice was also better than analysts anticipated. Let’s see what drives Jabil’s growth and see if he can maintain his healthy growth momentum.
Jabil ends 2022 on a high note
Jabil’s fourth-quarter revenue rose 22% year-over-year to $9.03 billion, easily wiping out the consensus estimate of $8.39 billion. The company’s revenue growth was driven by strong demand in the electronics manufacturing services (EMS) industry. Jabil’s EMS segment serves end markets such as networking and storage, 5G wireless infrastructure and cloud computing, industrial capital goods and semiconductors, and retailers.
The Diversified Manufacturing Services (DMS) segment, meanwhile, saw revenue growth of 13% year-over-year, driven by growth in automotive and transportation, healthcare and services. connected devices.
Jabil’s adjusted earnings jumped 62% from the year-ago period to $2.34 per share last quarter, helped by an increase in the company’s non-GAAP operating margin to 5%, compared to 4.2% a year ago. The company’s full-year revenue rose 14% to $33.5 billion, while adjusted earnings rose 36% to $7.65 per share. Jabil’s core operating margin increased to 4.6% in fiscal 2022 from 4.2% the prior year.
Jabil sees revenue and earnings growth in fiscal 2023 despite what it calls a “moderate economic slowdown and some moderation in growth, which will affect some end markets more than others.” The company has forecast adjusted earnings of $8.15 per share for fiscal 2023, while non-GAAP operating margin is expected to increase to 4.8%. Jabil forecasts $34.5 billion in revenue this year.
The full year forecast may not look appealing as it shows a single digit percentage increase from the top and bottom lines. However, investors should remember that Jabil was cautious at the start of fiscal 2022, forecasting $31.5 billion in revenue and $6.35 in earnings per share for the year. But healthy demand for contract manufacturing services has driven stronger growth, and it wouldn’t be surprising to see a similar scenario play out in fiscal 2023 as well thanks to the massive growth opportunities the company is on. seated.
Stronger-than-expected growth could once again be on the cards
Jabil has experienced impressive growth in several end markets over the past few years. The company’s automotive and transportation revenues, for example, have grown 121% over the past five years.
In fiscal 2022, the automotive and transportation segment generated $3.1 billion in revenue, an increase of 41% over the prior year. Jabil expects segment revenue to grow 29% this fiscal year to $4 billion. However, it should be noted that Jabil sees a total addressable market opportunity worth $229 billion in this market, driven by increased adoption of electric vehicles, connected cars and self-driving features.
Similarly, the 5G wireless and cloud infrastructure markets represent an $88 billion addressable market for the company. Segment revenue has grown 150% over the past five years, and there is room for robust growth here, as Jabil’s revenue from this segment was $6.5 billion in fiscal 2022. These are just a few of the many huge opportunities Jabil is sitting on, so it’s no surprise why analysts expect its earnings to grow at a 13% annual rate in the over the next five years.
Jabil, however, could grow at a faster rate given the scale of the opportunities it seeks. Additionally, Jabil trades at just 10 times earnings and just 0.26 times sales. These are great discounts for the S&P500earnings multiple of 18 and sales multiple of 2.26. That’s why investors looking to buy a value stock that can generate healthy upside going forward should consider buying Jabil in spades given its cheap valuation and strong growth potential.
Harsh Chauhan has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.