When the markets that your business serves are improving or growing, or both, that's good. When you can take business away from your rivals, that's good, too. When you can do both, well, that's really good. And that would seem to be the story at JabilCircuit
Business for the company's first quarter was certainly looking a bit brighter. Sales were up 31%, operating income was up 26%, and net income was up 38%. What makes that a bit more impressive is that the year-ago numbers weren't all that bad -- so this is strength upon strength, and not just a recovery from an awful year-ago period.
What I don't like so much is the "core earnings" junk that Jabil offers up. Basically, these are non-generally accepted accounting principles measures that exclude the amortization of intangibles, stock-based compensation, and other expenses. And of course, this makes the earnings look better. I don't completely blame the company, though, because the analyst community seems to aid and abet this nonsense as well.
Putting that aside, I think there are some meaningful positive factors in play for Jabil. From where I sit, it appears that big outsourcing client companies such as IBM
What's more, I like the fact that this company is relatively diversified. Jabil gets more of its revenue from consumer-oriented products than any other EMS company and isn't as dependent upon networking and communications as the likes of Solectron
When it comes to valuation, I'm inclined to be harsh on this company because it doesn't have quite as much ability to affect demand as its clients do. Still, even with some "harsh" assumptions, the valuation comes out looking pretty interesting. All in all, I'd say this company is worth further due diligence for investors who expect demand for all manner of electronics to stay healthy.
For more pre-fabbed Takes:
Fools, now is the time to open your hearts and wallets to worthy causes! Please support our five Foolish charities at www.foolanthropy.com .
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).