What does Jabil Inc's (NYSE:JBL) Balance Sheet Tell Us About Its Future?

Small-caps and large-caps are wildly popular among investors, however, mid-cap stocks, such as Jabil Inc (NYSE:JBL), with a market capitalization of US$4.70B, rarely draw their attention from the investing community. Despite this, commonly overlooked mid-caps have historically produced better risk-adjusted returns than their small and large-cap counterparts. This article will examine JBL’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Note that this information is centred entirely on financial health and is a top-level understanding, so I encourage you to look further into JBL here. See our latest analysis for Jabil

How does JBL’s operating cash flow stack up against its debt?

JBL has sustained its debt level by about US$2.08B over the last 12 months comprising of short- and long-term debt. At this stable level of debt, JBL currently has US$1.19B remaining in cash and short-term investments , ready to deploy into the business. Additionally, JBL has generated cash from operations of US$1.26B over the same time period, resulting in an operating cash to total debt ratio of 60.47%, indicating that JBL’s operating cash is sufficient to cover its debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In JBL’s case, it is able to generate 0.6x cash from its debt capital.

Can JBL meet its short-term obligations with the cash in hand?

With current liabilities at US$6.87B, it seems that the business has not been able to meet these commitments with a current assets level of US$6.63B, leading to a 0.96x current account ratio. which is under the appropriate industry ratio of 3x.

Can JBL service its debt comfortably?

JBL is a relatively highly levered company with a debt-to-equity of 96.26%. This is not uncommon for a mid-cap company given that debt tends to be lower-cost and at times, more accessible. No matter how high the company’s debt, if it can easily cover the interest payments, it’s considered to be efficient with its use of excess leverage. A company generating earnings after interest and tax at least three times its net interest payments is considered financially sound. In JBL's case, the ratio of 4.21x suggests that interest is appropriately covered, which means that lenders may be less hesitant to lend out more funding as JBL’s high interest coverage is seen as responsible and safe practice.

Next Steps:

JBL’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. However, its low liquidity raises concerns over whether current asset management practices are properly implemented for the mid-cap. I admit this is a fairly basic analysis for JBL's financial health. Other important fundamentals need to be considered alongside. You should continue to research Jabil to get a more holistic view of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for JBL’s future growth? Take a look at our free research report of analyst consensus for JBL’s outlook.
2. Valuation: What is JBL worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether JBL is currently mispriced by the market.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.