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Technology Stocks : Jabil Circuit (JBL) -- Ignore unavailable to you. Want to Upgrade?

To: Stickboy who wrote (4040)	6/10/1998 6:09:00 PM
From: kolo55	Read Replies (2) \| Respond to of 6317

I agree profit margins are and should be smaller. The flip side is that there isn't much room for a competitor to grab business based on pricing. The costs of setting up and transferring business, learning how to work with a new manufacturing partner etc for a price differential of 1% isn't much. So most ECM-OEM relationships tend to be amazingly stable. So yes, ECM stocks should trade at a lower PSR, and boy do they. I think Jabil could do $2B in sales in the fiscal year starting September 1st. So right now, Jabil has a forward PSR of about 0.63, which is considerably lower than all of their customers. But why should the PE be lower for the same growth rate? Jabil should grow 30+% annually for the next several years, and is now trading at about 19 times trailing earnings and 15 times forward earnings(and I believe the consensus forward earnings estimate is low). The S&P 500 is trading about 27 times trailing and 24 times forward earnings, and will be lucky to grow earnings 10-14% a year. Something is wrong here. The low growth stocks are getting higher multiples. Are they significantly less risky? I don't think so. The ECM sector growth has been very stable and predictable over the last five years. From all creditable analyses that I've seen, the growth is expected to be about the same over the next five years. One dollar of earnings growing at a given long term growth rate with the same risk, should be worth approximately the same for all stocks, no matter what business they are in. Since this isn't a 'sexy' business, the stocks in this sector just 'don't get no respect'. Paul