JABIL INC (JBL) stock intrinsic value fair value estimate & owner earnings analysis

Jabil is one of the world's largest contract manufacturers, building electronics and related hardware for other companies' brands in about 100 plants in 30 countries. It reports three segments: Intelligent Infrastructure (cloud and data-center racks, networking, power and capital equipment - the fastest-growing part, driven by the AI build-out), Regulated Industries (automotive and transportation, healthcare and medical devices, industrial and energy) and Connected Living and Digital Commerce (consumer devices and retail automation). The business earns thin margins on enormous volume; its value rests on execution, customer relationships and disciplined capital spending rather than on proprietary products. Customers are concentrated: in fiscal 2025 the five largest accounted for about 36% of revenue, one customer served mainly through Intelligent Infrastructure was 16% and another in the consumer segment was 11%. The company changed shape in fiscal 2023-2024 when it sold its Mobility business (smartphone enclosures, largely for Apple) to BYD Electronics. Revenue fell from $34.7 billion in fiscal 2023 to $28.9 billion in fiscal 2024 and recovered to $29.8 billion in fiscal 2025; the first nine months of fiscal 2026 brought $25.3 billion, up about 18% on the prior-year period, with the gain coming from data-center work. How we measure earnings. We use owner earnings: operating cash flow with working-capital swings removed, minus stock-based pay and the capital spending needed to maintain the business (spending attributable to revenue growth is excluded). Working capital matters enormously here - Jabil's reported operating cash flow has swung by billions in some years purely because of receivable sales and inventory timing - so stripping it out gives a much steadier picture. Because we value the whole business before its lenders and then subtract debt, we add back cash interest (about $160-210 million a year). On that basis the business generated roughly $855 million in fiscal 2022, $1,062 million in fiscal 2023, $538 million in fiscal 2024 (a year depressed by the divestiture transition and a large working-capital reversal) and $1,054 million in fiscal 2025. We anchor on fiscal 2022-2025, the period that best describes the post-divestiture company, and take the median: about $955 million a year, or roughly $9 per share. Earlier years reflect a different, more capital-hungry business with the smartphone work included. One judgement deserves a flag: capital spending fell to $468 million in fiscal 2025, under 2% of revenue against a 3-4% history, which flatters fiscal 2025; the first nine months of fiscal 2026 ran at $382 million, a little higher. Our anchor sits below fiscal 2025 partly for that reason. Amortization of acquired intangibles is modest (about $62 million in fiscal 2025), so wasting acquired assets do not materially distort the figures, but the company spent about $850 million on acquisitions in the first nine months of fiscal 2026, and whether those deals earn their cost is not yet visible. Growth credited. Fiscal 2025 business cash flow roughly doubled from the depressed fiscal 2024, but that rebound reflects a return toward a level already reached in 2023, not new growth, so the base case starts year one at the $955 million anchor - below fiscal 2025 - and credits only 2% a year for four years. That is well under Jabil's demonstrated long-run revenue growth (about 7% a year from fiscal 2016 to 2023, a period that included the 2020 shutdown), reflecting its proven ability to win new outsourcing programs year after year. We do not credit continued AI-driven acceleration, share gains or margin expansion: none is contracted, and contract manufacturing programs are typically re-bid. Buybacks are not counted as growth in the business's value; they only change how the value is divided. Base case: earnings hold near the anchor, edge up 2% a year to about $1.03 billion by year five and stay there through year twenty, then fade to zero over the following decade, because nothing in a contract manufacturer's position locks in customers beyond the life of its relationships. The business is worth about $12.9 billion. Debt at May 31, 2026 was about $3.38 billion of notes and borrowings against $1.36 billion of cash; treating about $860 million of that cash as surplus to operations and allowing a modest credit for notes carrying coupons of 3.0-4.25% well below today's rates, net debt is about $2.37 billion. That leaves about $10.5 billion for shareholders, or roughly $99 per share on 106.5 million diluted shares. Bear case: the AI data-center build-out pauses as the largest cloud customers digest capacity, much as the 2001-2002 telecom equipment bust hit this industry - Jabil's own revenue fell about 18% in fiscal 2002 - and a concentrated top customer re-sources a major program. Business cash flow drops from about $900 million in year one to $450 million and $400 million in years two and three as volumes fall and fixed plant costs are spread thinly, recovers only to $700 million, holds there to year fifteen and fades to zero over the following ten. Interest of roughly $170 million remains covered throughout. The 4.25% notes due 2027 and 3.95% notes due 2028 would be refinanced in the trough at higher rates, so we carry net debt at about $2.67 billion. The business is worth about $7.4 billion, leaving about $4.8 billion, or roughly $45 per share. Bull case: the company's existing data-center, power and healthcare programs ramp as visible in fiscal 2026 results, business cash flow starts near $1.15 billion, grows 5% a year for four years and 3% for five more, reaching about $1.6 billion, holds through year twenty and fades over the next decade. The business is worth about $18.6 billion; less $2.37 billion of net debt, about $153 per share. Margin of safety price. We are moderately confident in the earnings level: the post-divestiture business has produced $855 million to $1.06 billion in three of four years, and the one weak year has a clear explanation. The worst plausible outcome is a sharp, simultaneous loss of AI-related volume and a large customer, of the kind that halved earnings in past industry busts; Jabil's balance sheet - investment-grade, laddered notes with no single maturity above about $600 million and interest well covered even in the bear case - would survive it, but its assets are leased plant and equipment with limited value outside the business, so recovery depends on winning new work. The things we are most likely to be wrong about are the true level of maintenance capital spending (a return to 3% of revenue would cut annual cash flow by roughly $300 million) and how much of recent strength is a cyclical AI peak; if both go against us, the shares look worth something in the $60s to $70s. Jabil pays only a token dividend (32 cents a year), but retires 5-10% of its shares annually, which raises each remaining share's claim over the holding period. Weighing a bear value in the mid-$40s, a base value near $99 and a realistic chance the earnings level we assume is too high, the margin-of-safety price is about $68 per share: at that price each share carries roughly $13-14 of business cash flow a year before interest, so a few years of trough earnings followed by recovery toward the base case would imply a return near the 20% target, while the bear case implies a limited rather than permanent loss. Compared with our previous review a month ago, the business itself has not changed materially - nine-month results remain strong and debt rose by about $500 million alongside roughly $850 million of acquisitions - but the earlier figures were prepared on a different basis and are not comparable to these.