The pandemic tested operational efficiency and professional services to its limit as lockdowns were implemented across the globe, and industrial operations came to a halt. This sparked a rise in automation and digital transformation to enhance business operations and consumer experience.
Given the long-term growth prospects of the technology services industry, it could be wise to add fundamentally strong tech stocks Jabil Inc. (JBL), Dropbox, Inc. (DBX), and Box, Inc. (BOX) to their watchlist.
Before diving deeper into the fundamentals of these stocks, let’s discuss why it could be prudent to add them to one’s watchlist.
Increased IT spending, the rising adoption of software-as-a-service (SaaS), and increased cloud-based offerings indicate robust demand in the tech services market. According to the latest forecast by Gartner, cloud application services (SaaS) are projected to reach $197.29 billion in 2023.
The data-driven technology services industry creates excellent value for businesses, especially in operational efficiency, business opportunity discovery, and remote access optimization. The popularity of SaaS has grown significantly due to its scalability and flexibility. Also, SaaS is more cost-effective than traditional software solutions.
The demand for cloud-based application services is growing due to faster deployment and accessibility. The global SaaS market is expected to grow at a CAGR of 13.7% to $819.23 billion by 2030. Investors’ interest in technology services stocks is evident from the Global X Cloud Computing ETF’s (CLOU) 10.9% returns over the past six months.
Considering these factors, keeping these tech names on one’s watchlist could be wise.
Jabil Inc. (JBL)
JBL provides manufacturing services and solutions worldwide. It operates in two segments, Electronics Manufacturing Services and Diversified Manufacturing Services. The company serves 5G, wireless, cloud, digital print, and retail, industrial, and semi-cap industries, among others.
In terms of the trailing-12-month net income margin, JBL’s 2.74% is 16% higher than the 2.36% industry average. Its 15.96% trailing-12-month return on total capital is 611.5% higher than the 2.24% industry average. Likewise, its 1.90x trailing-12-month asset turnover ratio is 210.2% higher than the industry average of 0.61x.
JBL’s net revenue for the fiscal second quarter ended February 28, 2023, increased 7.7% year-over-year to $8.13 billion. The company’s non-GAAP core operating income increased 13.7% over the year-ago quarter to $391 million.
Its non-GAAP core earnings increased 4.1% year-over-year to $256 million. In addition, its non-GAAP EPS came in at $1.88, representing an 11.9% increase over the prior-year quarter.
JBL’s EPS for the quarter ending May 31, 2023, is expected to increase 8.4% year-over-year to $1.86. Its revenue for fiscal 2023 is expected to increase by 3.2% year-over-year to $34.54 billion. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 45.9% to close the last trading session at $84.
JBL’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Technology – Services industry, it is ranked #10 out of 81 stocks. The stock has an A grade for Momentum and a B for Quality. Click here to see the additional ratings of JBL for Growth, Value, Stability, and Sentiment.
Dropbox, Inc. (DBX)
DBX provides a content collaboration platform worldwide. The company’s platform allows individuals, families, teams, and organizations to collaborate and sign up for free through its website or app, as well as an upgrade to a paid subscription plan for premium features.
In terms of the trailing-12-month EBIT margin, DBX’s 14.85% is 216.7% higher than the 4.69% industry average. Its 32.21% trailing-12-month levered FCF margin is 359.5% higher than the 7.01% industry average. Likewise, its 22.86% trailing-12-month net income margin is 866.7% higher than the industry average of 2.36%.
DBX’s revenue for the first quarter ended March 31, 2023, increased 8.7% year-over-year to $611.10 million. The company’s non-GAAP net income increased 3.3% year-over-year to $146.10 million. Its non-GAAP net EPS came in at $0.42, representing a 10.5% increase over the prior-year quarter.
Analysts expect DBX’s EPS and revenue for the quarter ending June 30, 2023, to increase 19.8% and 7.2% year-over-year to $0.46 and $613.70 million, respectively. It has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 11.6% to close the last trading session at $22.69.
It is no surprise that DBX has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The stock is ranked #5 in the same industry. It has an A grade for Quality and a B for Value.
To see the additional POWR Ratings of DBX for Growth, Momentum, Stability, and Sentiment, click here.
Box, Inc. (BOX)
BOX provides a cloud content management platform that enables organizations of various sizes to manage and share their content from anywhere on any device. The company’s Software-as-a-Service platform allows users to collaborate on content, automate content-driven business processes, develop custom applications, and implement data protection, security, and compliance features.
In terms of the trailing-12-month gross profit margin, BOX’s 74.51% is 52.1% higher than the 48.99% industry average. Its 30.35% trailing-12-month levered FCF margin is 332.9% higher than the 7.01% industry average. Likewise, its 2.22% trailing-12-month Return on Total Assets is 751.5% higher than the industry average of 0.26%.
For the fiscal fourth quarter ended January 31, 2023, BOX’s revenue increased 9.9% year-over-year to $256.48 million. Its non-GAAP operating income increased 37.3% year-over-year to $66.56 million.
Its non-GAAP net income attributable to common stockholders rose 52.7% year-over-year to $56.29 million. Additionally, its non-GAAP net EPS attributable to common stockholders increased 54.2% over the prior-year period to $0.37.
BOX’s EPS and revenue for the quarter ending April 30, 2023, are expected to increase 19.3% and 4.6% year-over-year to $0.27 and $249.33 million, respectively. It has a creditable earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. Over the past month. the stock has gained 1.3% to close the last trading session at $27.51.
BOX’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It is ranked #3 in the Technology – Services industry. It has an A grade for Growth and Quality and a B for Value.
In total, we rate BOX on eight different levels. Beyond what we stated above, we have also given BOX grades for Momentum, Stability, and Sentiment. Get all BOX ratings here.
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JBL shares were trading at $83.95 per share on Monday morning, down $0.05 (-0.06%). Year-to-date, JBL has gained 23.34%, versus a 10.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions. More...
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