You wrote: ...the past isn't the way to gauge a company. however, companies know this and have manipulated this fact into higher stock valuations. xlnx is a classic example. NO GROWTH for 2 years. every q they said that growth next q would be great and FAILED to deliver.
My response: I didn't say not to use the company's past history as a guide in making investment decisions. Of course you should consider the company's history. And Jabil has one of the fastest growth rates of any company in America over the last five years... they've grown revenues and operating earnings even faster than Cisco (on a percentage basis), as a point of comparison.
What I actually said:
Using trailing earnings is nonsensical for a company that just went through a hiccup year, and is expecting much better results from announced new programs in the next three quarters... operating earnings sequentially up 7% next Q, 15% the next, and probably another 15% the next.
Jabil had a "hiccup" last year primarily due to 3Com pulling a program back inhouse. They have landed new programs and when the Dell laptop program starts later this summer/fall, will completely fill the Scotland plant that felt the biggest impact of the 3Com decision.
You wrote: i think you differ from mike in one key area. he thinks electronics are overproduced and supply will be cutback. you don't. that is the crux of the issue.
My response: I don't know or care if electronics growth rate is 7-10% this year (at historical growth rate), or whether we see no growth rate. Anyone who has taken the time and effort to look at EMS sector, knows that the growth is being driven by outsourcing existing programs and new programs. Programs going to EOL will simply die out. The EMS providers are doing less than 20% of the electronics manufacturing, and the outsourcing trend will provide 20-25% even in a flat electronics market. In fact, the largest EMS providers are getting a disproportionate amount of the growth, and they all will grow more than 30% annually over the next several years.
In Jabil's case, I expect they will earn about $1.40-1.50 over the next 12 months. They are trading about 26-28 times forward earnings and will grow earnings 30-35% per year over the next 3-5 years. The S&P 500 is trading at 26 times forward earnings, and will grow earnings 7-8% per year. By this measure, JBL is cheap. In fact, one could short the S&P and go long JBL for an interesting hedge play.
You wrote: you have stated 2 clear metrics. 15% sequential eps growth over the next 2 qs. let's see if that happens. if it does then you are right. if it doesn't... time to reevaluate,
imho...
My response: If you reread my original response, I expect a 7% sequential improvement in operating earnings in the MayQ, followed by 15% sequential increases in the AugQ and NovQ. This is from the company's conference call.
Paul |
