JBL: Low operating margin but strong stock performance

However, the operating margin of Jabil is not high, usually about 5%, which is not impressed to many technology investors.

Jabil Inc. is a global technology manufacturing solutions provider that offers design, production, and repair services for electronic and mechanical products. Founded in 1966 and headquartered in St. Petersburg, Florida, Jabil operates in over 30 countries. The company has over 200,000 employees.

Over the past couple of years, the company has been moving into fast-growing and higher-margin businesses such as Health Care & Packaging, Auto & Transportation (i.e. EVs), 5G Wireless & Cloud, and Industrials & Semi-cap.

JBL gave the following guidance for full-year FY23:

CEO Mark Mondello said: I remain confident in our plan moving forward, which is supported by both strong secular tailwinds and continued refinement of our more traditional businesses. As a result, we are raising our core EPS for the year to $8.40, a twenty-five cent increase from our outlook at the beginning of the fiscal year."

As you can see, core operating margin is expected to grow another 20 basis points in FY23, core EPS is expected to grow 9.8% yoy, and FCF is expected to grow to $900 million (+11.1% yoy).

JBL currently trades with a TTM P/E of 12.13x and Its pees Flex and Sanm trades with 13.81 and 13.53 TTM P/E.