Clean Bill of Health at Jabil?

So far this year, investors have little to show for sticking with Jabil Circuit (NYSE: JBL), even despite a recent return to profitability for the electronic manufacturing service (EMS) provider. In its defense, only a couple of peers are doing better than Jabil, and the entire industry is of dubious long-term appeal. But does Jabil stand out as a diamond in the rough?

Thursday's fourth-quarter and year-end results did contain some positive news. Q4 earnings returned to positive territory and full-year sales advanced 20%. But overall diluted earnings for the year fell by more than 50% to $0.35 per share, and the coming quarter will result in another fall -- management is projecting a bottom-line GAAP figure of $0.09 to $0.13.

Of course, the company's "core" earnings for the quarter are expected to come in at $0.33 to $0.37, and if you're familiar with the EMS industry, you're aware that Jabil and rivals such as Solectron (NYSE: SLR) and Sanmina-SCI (Nasdaq: SANM) habitually back out restructuring, amortization, and other charges that they deem to be "one-time" in nature.

Whichever figure Fools find most representative of Jabil's true operating results, the stock is very expensive on a price-to-earnings basis. I tend to rely on operating cash flow to get a better idea of how much capital a company's operations generate. Jabil pointed out that operating cash flow came in at $250 million for the fourth quarter, but the company failed to provide the full-year figure or a cash flow statement in the earnings press release.

As a result, we'll have to wait until Jabil files its annual 10-K for juicy cash-flow details. The past three full years have shown decent cash-flow generation, but growth has been uneven, and most has been used up on capital expenditures and the acquisition of other businesses. So while sales trends have been consistently positive for at least the past five years, profitability trends are murky.

Management recently touted goals for "step-by-step improvements" in its business and said it's "on the right path" to a clearer financial direction. Wall Street may be convinced, but I'm not seeing enough to get excited about. Perhaps it's the industry, with its razor-thin margins, customer concentration, and high fixed operating costs.

Jabil is projecting first-quarter core operating margins of only 3.3% to 3.7%, and its top five customers -- Agilent, Cisco Systems (Nasdaq: CSCO), Hewlett-Packard (NYSE: HPQ), IBM (NYSE: IBM), and Network Appliance (Nasdaq: NTAP) -- account for more than half of total sales. That's an impressive list of technology titans, but Jabil's revenue is at risk if one of them should jump ship. What's more, strong results from the customer base have so far failed to help Jabil post consistent and growing profits.