With a daily gain of 1.54% and a 3-month loss of 4.33%, Jacobs Solutions Inc (J, Financial) is a company that catches the eye of investors, particularly when considering its Earnings Per Share (EPS) (EPS) of 5.29. A pressing question arises: is Jacobs Solutions (J) fairly valued at its current market price? The following analysis delves into the valuation of Jacobs Solutions, providing investors with a clearer picture of its market position.
Company Introduction
Jacobs Solutions Inc (J, Financial) is a formidable presence in the global market, offering a wide array of services including engineering, design, procurement, construction, maintenance, and cyber engineering and security solutions. Its clientele spans across diverse sectors such as water, transportation, healthcare, technology, and chemicals. With approximately 60,000 employees, Jacobs Solutions has managed to generate an impressive $16.4 billion in revenue and $1.3 billion in adjusted operating income in fiscal 2023. When juxtaposed with the GF Value of $142.61, which suggests the stock's fair value, it becomes imperative to scrutinize whether the current stock price of $130.16 reflects the true worth of the company.
Summarize GF Value
The GF Value is an exclusive metric that quantifies the intrinsic value of a stock, incorporating historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. This calculation is instrumental in determining whether a stock is overvalued or undervalued. With a market cap of $16.40 billion and a share price of $130.16, Jacobs Solutions (J, Financial) appears to be fairly valued, indicating that the long-term return of its stock could align closely with the rate of its business growth.
Link: These companies may deliver higher future returns at reduced risk.
Financial Strength
Before investing, assessing a company's financial strength is crucial to avoid the risk of permanent loss. Jacobs Solutions' cash-to-debt ratio stands at 0.26, which is less than ideal compared to 69.92% of companies in the Construction industry. However, with a financial strength rating of 6 out of 10, Jacobs Solutions is deemed to have a fair financial condition.
Profitability and Growth
Companies with a track record of profitability generally present less risk. Jacobs Solutions has been profitable for 10 out of the past 10 years, boasting revenues of $16.40 billion and an EPS of $5.29 over the past 12 months. With an operating margin of 6.58%, it outperforms 59.82% of its peers in the Construction industry, earning it a strong profitability rank from GuruFocus.
Furthermore, growth is a pivotal factor in valuation, often correlating with long-term stock performance. Jacobs Solutions' 3-year average annual revenue growth rate of 7.9% surpasses 64.03% of companies in its industry, while its EBITDA growth rate of 28.5% ranks higher than 82.3%. These figures highlight the company's robust growth potential.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) provides insight into its profitability relative to the capital invested. Jacobs Solutions has an ROIC of 7.44 and a WACC of 7.55, indicating a close match between the returns generated and the cost of capital.
Conclusion
In summary, Jacobs Solutions (J, Financial) is fairly valued in the market. Its financial health is satisfactory, and its profitability stands strong. With growth rates outperforming a significant portion of its industry, Jacobs Solutions is poised for future success. For a more detailed look at the company's financials, investors can explore its 30-Year Financials here.
To discover high-quality companies that may deliver above-average returns, be sure to check out the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
