“Cramer’s Top Pick: Why JBL Could Skyrocket Now!”

Introduction

Jabil Inc. (NYSE: JBL) – an electronics manufacturing services provider – has recently earned high praise from CNBC’s Jim Cramer, who flagged it as a top pick for its “sensational” performance and aggressive share buybacks ([1]). Cramer noted that Jabil has been retiring roughly 5% of its stock per year and still trades at a reasonable valuation (about 22× earnings at the time) ([1]). With a diversified manufacturing portfolio spanning tech, healthcare, automotive and more, Jabil is positioned to benefit from trends like supply-chain diversification and “the electronification of everything.” This report dives into Jabil’s fundamentals – including its dividend policy, leverage, valuation, and key risks – to analyze why JBL could indeed have significant upside now.

Dividend Policy and Shareholder Returns

Jabil pays a modest quarterly dividend of $0.08 per share, a rate it has maintained consistently since 2006 ([2]). This equates to an annual payout of $0.32, which at current share prices is a token yield under 0.3% ([3]). The dividend has been steady but low – by design, as Jabil allocates far more cash to stock buybacks. In fact, over 2016–2020 the company repurchased about $1.47 billion of its stock, roughly five times the $283 million spent on dividends in that period ([4]). Even in recent years, annual dividends paid (~$45–50 million) are only ~5% of net income ([4]), indicating an extremely low payout ratio. This conservative dividend policy means the payout is amply covered – for instance, Jabil’s free cash flow (operating cash flow minus capex) was about $700 million in FY2023, which easily covers the ~$45 million of dividends many times over ([4]) ([4]). Share repurchases have been the primary return of capital: Cramer highlighted that Jabil has been buying back roughly 5% of its shares annually, bolstering earnings per share and shareholder value ([1]). Investors shouldn’t expect rapid dividend growth (the quarterly $0.08 has not changed in years), but the combination of token dividend and aggressive buybacks reflects Jabil’s focus on total shareholder return. Importantly, the dividend has been paid consecutively since 2006 ([2]), underscoring management’s commitment to maintain it (even if small) as a signal of stability. In summary, Jabil’s dividend yield is minimal and primarily symbolic, while share repurchases are the real engine of capital return – a strategy fully supported by strong cash flows and a low payout burden.

Leverage, Debt Maturities, and Coverage

Jabil’s balance sheet appears well-managed and conservatively leveraged. As of the end of FY2023 (Aug 31, 2023), the company had $2.875 billion in total debt outstanding ([4]) ([4]) and a substantial cash reserve of $1.8 billion ([4]). This puts net debt at roughly $1.1 billion, which is very modest relative to earnings (approximately 0.4× EBITDA by our estimates). Moreover, Jabil has no significant debt maturities due until 2026 ([4]). The debt maturity schedule is staggered: about $498 million comes due in FY2026, another ~$495 million in FY2027, and ~$497 million in FY2028, with the remaining $1.38 billion not due until 2029–2031 ([4]). This long-term debt profile greatly reduces refinancing risk in the near term. In addition, Jabil maintains ample liquidity – as of August 2023 it had $3.8 billion in unused revolving credit facilities and a commercial paper program up to $3.2 billion, all undrawn ([4]).

Crucially, interest coverage is strong. FY2023 interest expense was about $206 million ([4]). With GAAP operating income of $1.54 billion ([4]), Jabil’s EBIT covered interest roughly 7.5×. On an EBITDA basis (adding back ~$924 million depreciation) ([4]), coverage exceeds 10×, indicating plenty of cushion to meet debt service. Jabil’s gross leverage (debt/EBITDA) is only on the order of ~1.2×, or under 1× on a net debt basis – a low leverage ratio for an industrial company, which aligns with its solid investment-grade credit ratings (both S&P and Fitch rate Jabil BBB- with a stable outlook ([5]) ([6])).

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Overall, Jabil’s financial position is robust. Debt is moderate and well-termed out, while cash generation has allowed the company to invest and buy back stock without over-burdening the balance sheet. The company even raised $300 million of new 5.45% senior notes in 2023 largely to refinance a maturing bond at similar principal ([4]), showing prudent liability management. With no near-term maturities and strong coverage metrics, Jabil’s leverage shouldn’t pose a barrier to stock upside. In fact, a healthy balance sheet gives management flexibility for continued buybacks, strategic acquisitions, or dividend maintenance. As Cramer put it, Jabil “knows how to navigate volatility and turn challenges into opportunities” ([7]) – part of that comes from its sound capital structure, which provides resilience in downturns.

Valuation and Comparative Metrics

Despite its dramatic stock appreciation in recent years, Jabil’s valuation remains reasonable relative to its earnings growth. The stock trades around the low-to-mid 20s in terms of trailing price-to-earnings. When Cramer reiterated his bullish stance in mid-2025, he pointed out that Jabil was selling for roughly 22× earnings even after a sharp rally ([1]). Since then, earnings have continued to expand. In fact, Jabil’s forward P/E (looking at next year’s expected earnings) is now estimated in the mid-teens ([7]), reflecting both a higher earnings base and a stock pullback from 52-week highs. For context, Jabil’s core EPS has grown at a strong clip (over 40% annually on average for the past 5 years) ([7]), yet the stock is valued at only ~15× next-year earnings – suggesting a PEG ratio near 1.0, often a sign of an undervalued growth stock.

By other measures, Jabil also looks fairly valued or cheap. The shares trade at roughly 0.5× annual revenue (price-to-sales ~0.56) ([7]), which is low – though admittedly net margins in this industry are thin (Jabil’s net margin is about 4–5% ([7])). On a cash flow basis, the stock is around 15× free cash flow (trailing P/FCF ≈15.5) ([7]), again reasonable given the double-digit growth and high returns on capital Jabil has generated.

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Looking at peers, Jabil’s valuation is in line with or better than comparable companies. Other electronics manufacturing services firms like Sanmina and Plexus trade near ~23× earnings, and Flex Ltd. about ~20×, according to industry data, while smaller peer Celestica (CLS) recently shot up to an outlier P/E near 60 due to AI-related optimism ([3]). Jabil’s multiple in the low-20s (or mid-teens forward) doesn’t appear stretched – especially considering Jabil’s scale and breadth (it’s one of the world’s largest EMS providers) and improving mix of higher-margin segments. It’s worth noting Jabil’s book value is relatively low (~$14 per share, as heavy buybacks have reduced equity) ([7]), so the stock carries a high P/B ratio (~10×) ([7]) – not unusual for a manufacturing company with large intangible assets and stock repurchases.

In sum, JBL’s valuation metrics are modest for a company of its caliber. The market is not pricing in exorbitant growth: the stock’s earnings yield is around 5–7%, and enterprise value is only about ~7× EBITDA on a forward basis. This leaves room for upside if Jabil continues to execute well. Cramer’s bullishness partly stems from this value proposition – Jabil is “the kind of company you need… right now” because it’s delivering solid results yet “only sells at 22 times earnings”, which he viewed as attractive given the backdrop ([1]). If Jabil can reaccelerate growth (discussed below), the valuation could quickly look cheap, underpinning a potential stock “skyrocket” scenario.

Risks and Red Flags

While Jabil’s fundamentals are strong, investors should weigh several risk factors and potential red flags that could hinder its bullish thesis:

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– Customer Concentration: Jabil is highly dependent on a handful of major customers. Its five largest customers account for ~42% of revenue ([4]). Notably, Apple Inc. alone represented 17% of Jabil’s revenue in FY2023 ([4]). This reliance on big clients means Jabil’s fortunes can swing with the plans of a few companies. If a key customer like Apple or others reduces orders, switches suppliers, or demands pricing concessions, it would significantly impact Jabil’s sales and margins. The company has been diversifying (Apple was 22% of revenue in 2021, now 17% ([4])), but concentration risk remains a factor to monitor.

– Thin Margins and Cyclical Demand: As is typical in contract manufacturing, Jabil runs on low margin business. Operating margins are only in the mid-single digits (~4–5% recently) ([7]), and net margins around 4–5% ([7]). Small cost overruns, inefficiencies, or an unfavorable product mix can erode profitability quickly. Moreover, many of Jabil’s end-markets (electronics, communication gear, etc.) are cyclical and sensitive to economic swings. In early 2024, Jabil had to cut its revenue and earnings forecast due to softer demand in areas like 5G, renewable energy, and consumer electronics – citing inflation and reduced discretionary spending as headwinds ([8]). In fact, fiscal 2024 revenue is projected around $27–28 billion, down sharply from $34.7 billion in 2023 ([9]). Such volatility underscores that a downturn in the tech/electronics cycle (or end-customer markets) can significantly hit Jabil’s top line. The company has responded with cost controls – even announcing a restructuring with headcount reductions to mitigate the slowdown ([9]) – but the broader risk is that economic cyclicality and rapid demand shifts are inherent in Jabil’s business.

– Geopolitical and Supply Chain Risks: Jabil’s global footprint (100+ sites in 30 countries) exposes it to geopolitical uncertainties and logistical risks. For instance, U.S.-China trade tensions have pressured Jabil and its customers. In 2023, Jabil agreed to sell its China-based mobility manufacturing business (serving Apple) to China’s BYD Electronics for $2.2 billion ([10]). Observers noted this was likely due to U.S.-China frictions and the trend of American firms reducing their China exposure ([11]). While that sale brings in cash and lowers concentration in China, it also means relinquishing a chunk of business and could complicate the Apple relationship. More broadly, operating in diverse regions means Jabil faces risks such as political instability, tariffs, export controls, and currency fluctuations. Supply chain constraints are another concern – Jabil notes some components it uses are single-source ([4]), so any disruption at a key supplier (or supplier pricing power) could delay production or squeeze margins. The COVID-19 pandemic and other events have illustrated how manufacturing networks can be interrupted by unforeseen crises. Jabil will need to continuously manage these geopolitical and supply chain challenges to avoid materially impacting its operations.

– Execution and Integration Risk: Jabil is expanding into new technological and vertical markets, which presents execution risks. Part of the bullish case on Jabil is its push into higher-margin areas like healthcare devices, automotive electrification, cloud/datacenter hardware, and even entirely new arenas (for example, Jabil recently acquired a pharmaceutical manufacturing (CDMO) business to support drug companies ([7]) ([7])). Transitioning from core electronics assembly into areas like drug formulation or packaging requires new expertise and compliance with different regulations. Missteps in integrating acquisitions or executing in unfamiliar industries could lead to write-offs or underperforming investments. Additionally, as Jabil takes on more complex design/engineering roles (not just pure manufacturing), it assumes greater responsibility for product outcomes – which could expose it to higher warranty claims or liability if something goes wrong. Cost control is another execution item: Jabil’s capital expenditures have been high (over $1 billion annually in recent years) ([4]) ([4]) as it builds capacity; ensuring those investments earn good returns is critical. Any failure to effectively integrate new ventures or manage its growth could be a red flag for investors.

– Financial Reporting and Other Risks: There are no glaring red flags in Jabil’s financial reporting, but the use of non-GAAP “core” earnings metrics bears watching. The company excludes various charges (restructuring, stock comp, etc.) to present “core operating income” in its discussions ([4]) ([4]). While this is common and Jabil’s adjustments seem reasonable, investors should still keep an eye on the gap between GAAP and core results. For example, in FY2023 GAAP net income fell to $818 million even as GAAP operating income rose, due in part to a significantly higher tax expense ([4]) – understanding such swings is important. Jabil’s debt levels and pension obligations appear manageable, but the Debt-to-Equity ratio is high (~2.0) because stock buybacks have reduced equity on the balance sheet ([7]). This accounting effect isn’t an immediate risk, but it means book value is low; continued large buybacks or any big impairment could even make equity negative (as seen in some heavily leveraged repurchasing companies). Lastly, insider ownership is modest (~3% of shares) ([7]), which is not alarming but means the stock is mostly in the hands of institutions – stock price could be volatile if big funds rotate out. All told, Jabil must execute smoothly to justify a “skyrocket” – any stumble on these fronts (customer loss, margin squeeze, geopolitical event, or acquisition flop) could derail the bullish case.

Valuation Upside Drivers and Open Questions

Jabil’s stock has strong momentum, but several open questions will determine how much upside can be realized from here:

– Can Growth Re-Ignite? A key question is whether the revenue dip in FY2024–FY2025 is a temporary trough or a new normal. Jabil’s forecast for FY2025 revenue (~$27 billion) is slightly below even the reduced FY2024 level ([9]), implying two consecutive years of decline after the FY2023 peak. This is partly due to deliberate moves (exiting the low-margin China mobility business) and partly end-market softness ([8]). The bull case is that Jabil will return to growth beyond FY2025 as new programs ramp up – e.g. secular tailwinds in electric vehicles, cloud/data-center gear (for AI and 5G deployments), and healthcare devices. Jabil itself remains “optimistic” about these sectors driving future growth ([9]). An open question is how quickly can Jabil replace lost revenue from the divested business and weak legacy segments? If designs won in automotive, aerospace, or industrial markets start contributing meaningfully in 2025–2026, Jabil could resume a mid-single-digit growth trajectory (as Fitch predicted longer-term ([6]) ([6])). Conversely, if end-market demand stays sluggish or trade issues limit growth, Jabil’s top line could stagnate longer, tempering stock upside. Investors will be watching upcoming quarters for re-acceleration signs.

– Margin Expansion – Sustainable or One-Time? Jabil has been focusing on higher-margin business (its Diversified Manufacturing segment) and shedding lower-margin volumes. The sale of the Apple-focused unit, while cutting revenue, likely improves margin profile (Apple’s contract manufacturing is known for razor-thin margins). Indeed, Jabil’s net margin jumped to nearly 5% recently ([7]), and core operating margin topped 5% – solid figures for this industry. The open question: Can Jabil sustain or even expand margins going forward? Optimistically, as non-traditional segments (healthcare, packaging, cloud) grow and economies of scale kick in, Jabil might achieve structurally higher margins than the ~3% it used to run. Fitch Ratings noted an upside scenario if EBIT margins approach 4%+ consistently ([6]) – Jabil is already around that level on a GAAP basis and higher on core basis. However, there are risks: intense competition could force Jabil to pass cost savings back to customers, and new ventures might not initially be as efficient. Another factor is how Jabil handles its cost structure during downturns – the company is incurring ~$150–300 million in restructuring costs through 2024 to resize operations ([8]), which should aid margins later, but those are one-time moves. It remains to be seen if Jabil’s recent margin gains are the “new normal” or a peak. The answer will greatly influence earnings growth (and thus valuation), making this a pivotal open question.

– Capital Allocation – What’s Next for the $2.2B Windfall? With the sale of the Chinese mobility unit for $2.2 billion in cash ([10]), Jabil has a substantial influx of capital. Management’s strategy for deploying this cash is an open question. Will they double down on share repurchases (accelerating the already aggressive buyback program)? So far Jabil’s Board expanded the buyback authorization to $2.5 billion as of August 2023 ([12]), suggesting a likelihood of continued heavy buybacks. Alternatively, the cash could fund acquisitions in growth areas – for example, Jabil recently acquired Pharmaceutics International Inc. to bolster its healthcare/pharma solutions ([7]) ([7]). Another potential use is debt reduction, though Jabil’s debt is manageable and low-cost, so that may be lower priority. How this capital is allocated will impact Jabil’s future. Heavy buybacks could boost EPS further (Cramer certainly cheers the repurchase strategy ([1])), but investors might favor reinvestment if it can drive higher long-term growth. It’s a balance: returning cash vs. seizing new opportunities. Clarity on this – perhaps at upcoming investor days or earnings calls – is eagerly awaited.

– Strategic Direction and Corporate Structure: Jabil’s portfolio now spans a wide array of industries and even entirely new fields. This raises the question of whether Jabil will remain a single integrated company or consider strategic separation. There have been rumors (as reported by industry watchers) that Jabil might be contemplating a broader “corporate transformation”, with the Chinese unit sale possibly just a first step ([11]). While speculative, one could imagine Jabil eventually spinning off or carving out certain segments (for instance, the traditional EMS business vs. the higher-margin DMS business) to unlock value. Alternatively, Jabil may reposition itself as a more design/engineering-focused solutions provider, moving up the value chain from pure manufacturing. How far will Jabil go in reshaping its identity? Management’s long-term vision – whether to stay diversified or streamline – remains an open question. Any such moves (spin-offs, major acquisitions, or refocusing on core competencies) could be catalysts for the stock if done right, or points of uncertainty if not clearly communicated.

– Macro and Secular Tailwinds: Lastly, a broad question: To what extent will Jabil capitalize on the current macro trends? The company is exposed to powerful tailwinds like the onshoring of supply chains (Jabil is expanding in India, for example) and the growth of new technologies (EVs, autonomous systems, cloud/AI infrastructure). Cramer alluded to Jabil “representing the building out of technology” in the economy ([13]) – essentially, Jabil is a picks-and-shovels play for multiple tech booms. A key determinant of “skyrocketing” potential is whether Jabil can capture these opportunities faster than its competitors. For instance, smaller rival Celestica saw its stock surge as it won notable AI hardware assembly deals, leading to outsized optimism. Jabil has the scale and customer relationships to compete for similar next-gen manufacturing programs. An open question is how much share Jabil can win in emerging areas (e.g. securing big contracts in the EV battery or AI server supply chain) and how profitable those will be. Success here could accelerate growth and elevate Jabil’s profile (and valuation multiple), while lagging could leave Jabil viewed as a slower-growth, albeit solid, player.

In conclusion, Jabil has navigated a challenging environment adeptly – turning volatility into opportunity – and earned Cramer’s top-pick endorsement for good reason ([7]) ([1]). The company’s rock-solid financials, shareholder-friendly capital returns, and decent valuation set the stage for potential upside. If Jabil can answer the open questions favorably – reviving growth through new markets, sustaining margins, and smartly deploying its ample cash – JBL truly could skyrocket from here. As always, investors should keep an eye on the risks, but Jabil’s trajectory and execution so far paint an encouraging picture of a stock with room to run.

Sources

  1. https://finviz.com/news/165468/jim-cramer-says-jabil-has-been-sensational
  2. https://jabil.com/news/jabil-declares-quarterly-dividend-q4-fy23.html
  3. https://macrotrends.net/stocks/charts/JBL/jabil/dividend-yield-history
  4. https://sec.gov/Archives/edgar/data/898293/000119312523259599/d533726d10k.htm
  5. https://cbonds.com/news/2436279/
  6. https://marketscreener.com/news/latest/Fitch-Affirms-Jabil-s-Ratings-at-BBB-Revises-Outlook-to-Positive-22583494/
  7. https://finviz.com/quote.ashx?ov=list_date&%3Bp=d&%3Bt=JBL&%3Bty=ea
  8. https://reuters.com/technology/apple-supplier-jabil-cuts-full-year-forecasts-softer-demand-2024-03-15/
  9. https://reuters.com/technology/apple-supplier-jabil-announces-restructuring-beats-fourth-quarter-estimates-2024-09-26/
  10. https://wctsradio.com/byd-unit-buys-us-firm-jabils-china-mobility-business-for-2-2-billion/
  11. https://trendforce.com/news/2023/08/29/news-can-byds-acquisition-of-jabils-chinese-business-truly-secure-a-place-in-apples-supply-chain
  12. https://sec.gov/Archives/edgar/data/898293/000119312523244751/d508757dex991.htm
  13. https://insidermonkey.com/blog/jim-cramer-says-jabil-inc-jbl-knows-how-to-navigate-volatility-and-turn-challenges-into-opportunities-1459240/

For informational purposes only; not investment advice.