[1] Market Valuation: At P/EBIT of 13.9, QRVO stock is more expensive per dollar of operating profit compared to 8.7 for JBL
Market ValuationQorvoJabil Circuitvs Jabil CircuitAs of 11/12/2021 Price To Sales Ratio (P/S)3.80.3More ExpensivePrice To OpInc Ratio (P/EBIT)13.98.7More ExpensivePrice To Earnings Ratio (PE)15.713.3More Expensive
[2] Growth & Profits: Considering the valuation, the market appears to be rewarding QRVO's higher growth and demonstrated profit generation ability - QRVO has demonstrated better revenue growth: 13.0% last Q (qoq), 18.4% last Q (yoy), 29.3% LTM, and 10.5% annually in last 3 FY - In comparison, JBL has grown at 2.7%, 1.5%, 7.4%, and 9.8% respectively, during the same periods - Similarly, QRVO has shown greater profit generation promise: QRVO, 23.5% average margin, 14.7% average margin expansion, and 30.7% cash flow - The corresponding values for JBL stand at 3.3%, 0.9%, and 4.9%Note: Average margin is based on average of last Q, LTM, and last 3 FY, while margin change is based on last Q margin vs 3Y average
Growth & ProfitQorvoJabil Circuitvs Jabil Circuit As of 11/12/2021 Revenue GrowthLast Q Growth (QoQ)13%2.7%Growing FasterLast Q Growth (YoY)18.4%1.5%Growing FasterLTM Growth29.3%7.4%Growing FasterLast 3 Fiscal Year CAGR10.5%9.8%Growing Similar ProfitabilityLast Q OpInc Margin28.9%3.6%More ProfitableLTM OpInc Margin27.6%3.6%More ProfitableLast 3 Fiscal Year Average14.2%2.6%More ProfitableLTM FCF Margin30.7%4.9%Higher Cash Flow %
[3] Financial Risk: Then, is the market ignoring risk to QRVO? Unlikely as the company does not appear to be at higher risk vs JBL - QRVO has a better debt position, with debt as % of equity of 0.03% vs 30.7% for JBL - QRVO has more cash cushion, with cash as % of assets of 15.2% vs 9.4% for JBL
Financial RiskQorvoJabil Circuitvs Jabil Circuit As of 11/12/2021Debt as % of Equity0.03%30.7%Lower Debt LoadCash as % of Assets15.2%9.4%Better Cash Position
[4] Market Returns: QRVO is expensive, but has higher growth and lower risk; Appears to be a reasonable choice but what about market returns? - JBL has higher average annualized return of 31.2% vs 20.1% for QRVO based on key market periods - These key market periods include, year-to-date, pre-covid to now, and 1, 2, and 3 years prior to covid
Precovid date is taken as end of Feb 2020
Notes:
[1] Q = quarter, LTM = last twelve months, FY = fiscal years, yoy = year-on-year, qoq = quarter-on-quarter
[2] Revenue growth decision is made by giving more weightage to long-term revenue growth (3-year average) and lesser weightage to quarterly growths
[3] Margin mentioned is average of last Q, LTM, and last 3 FY; margin increase is average of increase in last Q vs LTM and increase in last Q vs 3-FY average
