Is Wall Street Misjudging Jacobs Engineering (J) Stock?

Jacobs Engineering may be overvalued, but the 15 analysts following the company give it an average rating of buy. The analysts have set target prices ranging from $137.0 to $175.0 per share, for an average of $154.13. At today's price of $113.14, Jacobs Engineering is trading -26.6% away from its average target price, suggesting there is an analyst consensus of strong upside potential.

Jacobs Engineering Group Inc. (NYSE: J) is an American international technical professional services firm. The large-cap Industrials company is based in Dallas, TX. Jacobs Engineering has offered a 0.89% dividend yield over the last 12 months.

Jacobs Engineering has a trailing twelve month P/E ratio of 22.05, compared to an average of 20.49 for the Industrials sector. Based on its EPS guidance of 8.2, the company has a forward P/E ratio of 13.8. Based on the 102.2% average annual growth rate of Jacobs Engineering's historical and projected earnings per share, the company's PEG ratio is 0.22. This EPS growth rate is likely not sustainable, so will substitute the broader market's 5-year projected EPS growth rate of 13.05%, which gives us a PEG ratio of 1.69. This suggests that these shares are overvalued.

In contrast, the market is undervaluing Jacobs Engineering in terms of its equity because its P/B ratio is 2.561. In comparison, the sector average is 3.78. The company's shares are currently trading 70.26% above their Graham number, implying that they are overvalued in terms of earnings and book value.

If analysts are giving the the company a decent rating despite its hefty price point, it could be related to its strong cash flows and growing revenues. They might also believe that Jacobs Engineering's positive margin growth trend will continue.

2019-09-30 2020-09-30 2021-09-30 2022-09-30
Revenue (MM) $12,738 $13,519 $14,241 $15,086
Revenue Growth n/a 6.13% 5.34% 5.93%
Gross Margins 19.45% 19.13% 21.37% 22.05%
Gross Margins Growth n/a -1.65% 11.71% 3.18%
Operating Margins 3.18% 3.96% 4.83% 6.08%
Operating Margins Growth n/a 24.53% 21.97% 25.88%
Earnings Per Share $6.38 $3.79 $3.7 $5.06
EPS Growth n/a -40.6% -2.37% 36.76%
Diluted Shares (MM) 133 130 129 127
Free Cash Flow (MM) -$502 $689 $633 $347
FCF Growth n/a 237.05% -8.0% -45.21%
Capital Expenditures (MM) $136 $118 $93 $128
Net Debt / EBITDA 0.73 1.16 2.03 2.25
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.