Electronics manufacturing stock Jabil has been in a cup-with-handle base since the tail end of December. The industry group ranking and the company's relative strength line have been gaining strength.
Jabil serves a vast array of industries including automotive, cloud computing, aerospace, retail and manufacturers of "smart" appliances. They engineer and produce advanced assembly, robotic and electronic autonomous systems, and 3D printing. Jabil has over 100 locations and operates in more than 30 countries.
In the May-ended quarter, Jabil's electronics manufacturing business saw a 23% jump in sales. That division serves 5G wireless, cloud computing, networking and other industries.
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Manufacturing Stock In Cup-With-Handle Base
The stock has been in a cup-with-handle base since hitting its 52-week high of 72.11 on Dec. 29. The 34-week long base contains a 32% decline, which is near the maximum depth under CAN SLIM criteria. The handle is still forming on the weekly chart, and at 7% deep is at an optimal depth.
The stock price is within 8% of the 65.98 buy point on the MarketSmith chart. Jabil is coming to a test of the 200-day moving average. Shares are around 15% off the 52-week high. With the stock market under pressure, Jabil can be a stock to watch and could become a buy candidate with a stronger market.
The relative strength line is at an all-time high, as indicated by the blue dot on the weekly MarketSmith chart.
No. 1 In Its Industry
Jabil is No. 1 in the Electronics-Contract Manufacturing industry group, which is ranked No. 13 out of the 197 industries IBD tracks. The group has moved up from No. 54 just three months ago and has an A+ Group Relative Strength Rating.
The company earns a perfect 99 Composite Rating and has an improving 84 Relative Strength Rating. Jabil has a high 43% return on equity, a measure of financial efficiency. But its debt-to-equity ratio of 135% is considerably higher than other companies in the group.
Accelerating Earnings and Sales Growth
Quarterly earnings growth ranged from 20% to 32% in the last three quarters. Jabil has a 96 EPS Rating, meaning it has outperformed 96% of all publicly traded companies in earnings growth.
Analysts expect 33% annual EPS growth in the fiscal year that ends this month, and a more modest 6% in the next fiscal year. The company reported fiscal Q3 earnings on June 16, beating on EPS and sales. It also raised its full-year revenue guidance. Jabil has a 39% three-year EPS growth rate, as seen on the IBD Stock Checkup.
The company is set to report its earnings at the end of September. Last quarter, Jabil beat profit views by 6.2%.
Quarterly sales growth is below the 25% target of the CAN SLIM strategy, but sales growth accelerated from 1% to 9%, 11% and 15% in the last four quarters.
Institutional Support For This Manufacturing Stock
Mutual funds own 54% of the manufacturing stock. Shares are held in the A+ rated Invesco Value Opportunities Fund. Credit Suisse initiated coverage of the company on Aug. 17 with an outperform rating and a 74 price target.
