Jabil Inc. (NYSE:JBL) shares are up more than 21.08% this year and recently increased 0.17% or $0.05 to settle at $28.66. TTM Technologies, Inc. (NASDAQ:TTMI), on the other hand, is up 20.69% year to date as of 11/13/2017. It currently trades at $16.45 and has returned -2.03% during the past week.
Jabil Inc. (NYSE:JBL) and TTM Technologies, Inc. (NASDAQ:TTMI) are the two most active stocks in the Printed Circuit Boards industry based on today’s trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.
The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect JBL to grow earnings at a 12.00% annual rate over the next 5 years. Comparatively, TTMI is expected to grow at a 19.90% annual rate. All else equal, TTMI’s higher growth rate would imply a greater potential for capital appreciation.
Profitability and Returns
Growth doesn’t mean much if it comes at the cost of weak profitability. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return. , compared to an EBITDA margin of 12.96% for TTM Technologies, Inc. (TTMI). JBL’s ROI is 6.30% while TTMI has a ROI of 5.10%. The interpretation is that JBL’s business generates a higher return on investment than TTMI’s.
Earnings don’t always accurately reflect the amount of cash that a company brings in. JBL’s free cash flow (“FCF”) per share for the trailing twelve months was +2.60. Comparatively, TTMI’s free cash flow per share was +0.30. On a percent-of-sales basis, JBL’s free cash flow was 2.41% while TTMI converted 1.21% of its revenues into cash flow. This means that, for a given level of sales, JBL is able to generate more free cash flow for investors.
Liquidity and Financial Risk
Liquidity and leverage ratios provide insight into the financial health of a company, and allow investors to determine the likelihood that the company will be able to continue operating as a going concern. JBL has a current ratio of 1.00 compared to 1.70 for TTMI. This means that TTMI can more easily cover its most immediate liabilities over the next twelve months. JBL’s debt-to-equity ratio is 0.88 versus a D/E of 1.04 for TTMI. TTMI is therefore the more solvent of the two companies, and has lower financial risk.
JBL trades at a forward P/E of 9.88, a P/B of 2.18, and a P/S of 0.26, compared to a forward P/E of 9.43, a P/B of 1.77, and a P/S of 0.64 for TTMI. JBL is the cheaper of the two stocks on sales basis but is expensive in terms of P/E and P/B ratio. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.
Analyst Price Targets and Opinions
Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. JBL is currently priced at a -11.08% to its one-year price target of 32.23. Comparatively, TTMI is -16.37% relative to its price target of 19.67. This suggests that TTMI is the better investment over the next year.
The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.80 for JBL and 1.30 for TTMI, which implies that analysts are more bullish on the outlook for JBL.
Risk and Volatility
Beta is an important measure that gives investors a sense of the market risk associated with a particular stock. A beta above 1 signals above average market risk, while a beta below 1 implies below average volatility. JBL has a beta of 0.53 and TTMI’s beta is 1.54. JBL’s shares are therefore the less volatile of the two stocks.
Insider Activity and Investor Sentiment
Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. JBL has a short ratio of 5.97 compared to a short interest of 8.71 for TTMI. This implies that the market is currently less bearish on the outlook for JBL.
TTM Technologies, Inc. (NASDAQ:TTMI) beats Jabil Inc. (NYSE:JBL) on a total of 7 of the 14 factors compared between the two stocks. TTMI generates a higher return on investment, is more profitable and higher liquidity. In terms of valuation, TTMI is the cheaper of the two stocks on an earnings and book value, TTMI is more undervalued relative to its price target. Finally, OME has better sentiment signals based on short interest.