Investment Thesis
Jabil demonstrates solid operational performance with strong free cash flow generation ($536M) and exceptional ROE (27.5%), but faces significant financial constraints from high leverage (2.88x D/E) and razor-thin margins (2.2% net, 4% operating) with flat profitability despite 3.2% revenue growth. Liquidity metrics are concerning with a current ratio of 1.01x and quick ratio of 0.68x, leaving limited financial flexibility.
Strengths
- Strong free cash flow generation of $536M (3.2% FCF margin) provides operational flexibility
- Exceptional ROE of 27.5% demonstrates efficient capital deployment despite thin margins
- Scale advantage with $16.6B revenue and positive 3.2% YoY growth provides market stability
- Solid operating cash flow of $734M supports dividend and debt service capacity
Risks
- High financial leverage of 2.88x D/E with tight interest coverage of 3.0x creates vulnerability to rate increases
- Net income flat YoY despite revenue growth indicates profitability deterioration and margin compression
- Liquidity stress with current ratio of 1.01x and quick ratio of 0.68x limits operational cushion
- Structural thin margins (9% gross, 2.2% net) typical of contract manufacturing leave zero margin for error
- Potential share dilution evidenced by 47% YoY EPS decline despite flat net income
Key Metrics to Watch
- Net margin expansion/contraction - must improve from 2.2% to justify current leverage
- Debt/Equity ratio trend - monitor if deleveraging efforts reduce 2.88x ratio
- Free cash flow sustainability - confirm $536M FCF continues for debt reduction
- Interest coverage ratio - must remain above 3.0x minimum threshold
- Working capital management - current ratio decline below 1.01x would signal distress
Financial Metrics
Revenue
16.6B
Net Income
369.0M
EPS (Diluted)
$3.43
Free Cash Flow
536.0M
Total Assets
20.6B
Cash
1.8B
Profitability Ratios
Gross Margin
9.0%
Operating Margin
4.0%
Net Margin
2.2%
ROE
27.5%
ROA
1.8%
FCF Margin
3.2%
Balance Sheet & Liquidity
Current Ratio
1.01x
Quick Ratio
0.68x
Debt/Equity
2.88x
Debt/Assets
93.5%
Interest Coverage
3.04x
Long-term Debt
3.9B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-04-11T20:00:23.537378 |
Data as of: 2026-02-28 |
Powered by Claude AI