Hewlett-Packard Company (HPQ), International Business Machines Corp. (IBM): The Wait Continues for Jabil Circuit, Inc. (JBL)

There are threats even with success
While there are doubts that Jabil can overcome obstacles in execution, there will still be concerns if/when Jabil truly shows signs of success. The company competes with the likes of Flextronics International Ltd. (NASDAQ:FLEX) and Benchmark Electronics, Inc. (NYSE:BHE), which are waiting to see the outcome of Jabil’s diversification efforts. There’s no shame in emulating success.

These companies are biding their time and watching as Jabil Circuit, Inc. (NYSE:JBL) make these investments to build its capabilities. But as soon as they get the signal, both Flextronics and Benchmark will be forced to follow a similar path. Their investors should demand it. Why wouldn’t they? I don’t believe Jabil is concerned about this today. But at some point, it will affect Jabil’s margins if Flextronics can undercut in component builds.

What’s it going to be?
That’s hard to say at this point. However, for investors with patience, there’s blood in the water: The stock is down 5% and is now trading at just 7.5 times fiscal 2013 earnings of $2.44. This is cheap territory. But we’re also making a bet that the company can successfully execute its long-term strategy. Second-quarter results were disappointing, yes. But based on projected fiscal 2014 estimates of $2.77 per share, which pushes the P/E lower to 6, Jabil Circuit, Inc. (NYSE:JBL) is worth the gamble.

The article The Wait Continues for Jabil Circuit originally appeared on Fool.com and is written by Richard Saintvilus.

Fool contributor Richard Saintvilus owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and International Business Machines (NYSE:IBM).

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