Jabil Circuit boasts blue chip client list: circuit board manufacturer has grown profits by 58% for the last five years

For several years, Cisco Systems has been a darling of high tech investors, and rightly so. The company controls more than three-quarters of the global market for products that link networks and power the Internet, including routers and switches.

Cisco also routinely beats analysts estimates. Yet, a recent article in Barron's suggested that the stock is highly overpriced: it is trading at 190 times its earnings, it is unlikely to grow at the same rate it has grown in the past few years, and its accounting practices inflate its earnings.

America Online, a former high tech favourite, is currently out-of-favour as a result of its merger with Time-Warner.

Microsoft is trading at its lowest level in a year because of its problems with the U.S. justice department.

There are of course hundreds of high tech stocks that are, by any standards, overpriced. Yet, the new economy is a reality and future-oriented investors cannot afford to ignore this sector. But better values may be found in somewhat less widely known high tech stocks. One such stock is Jabil Circuit (NYSE: JBL; Recent price $32.00).

Jabil Circuit's business

Jabil Circuit manufactures printed circuit boards for high-end computing. Jabil provides network products ranging from routers to notebook computers to medical gear. Its customers include such industry giants as Lucent, Nortel, Cisco and Dell. The company also leases factories and handles supply chain management.

Jabil's growth

Jabil has been growing at the rate of 39% per year over the past five years. Its sales reached US$2 billion last year. Its profit growth has been even more impressive: 58% average growth per year. Analysts expect the profit to grow at an annual rate of 30% for the next five years. Its price-to-sales ratio is 2.4 times, much less than most other, better known high tech companies.

Global expansion

Jabil has been expanding outside the U.S. It has expanded operations into several countries such as Brazil, China, Hungary and Mexico.

Reasonably priced

Yet Jabil is priced very reasonably (for a good high tech company) at 42 times its estimated earnings for this year. One of the reasons for its success may be its low profit margin of just 11%, which makes it highly competitive. (By contrast Cisco's profit margin is 65%.)

All this makes Jabil Circuit an attractive addition for investors who want to add high quality high tech stocks to their portfolio.