Jacobs Solutions Inc. (J)

Conclusion

Jacobs Solutions Inc. is a Dallas-based engineering and consulting group that plans, designs and runs infrastructure and advanced facilities across several regions. On 2026-11-09 its shares traded at 156.39 USD, giving a market capitalisation of 18.5 billion USD and an enterprise value of 21.3 billion USD.

The verdict is overvalued. The price-to-earnings ratio of 55.2 compares with a ten-year median of 27.8, and EV to EBITDA of 23.6 compares with a median of 18.5. The DCF gives 67.55 USD per share at a discount rate of 8.9%. The fair value from historical multiples is 113.13 USD, and the fair value band runs from 72.27 to 108.41 USD with a midpoint of 90.34 USD, a margin of safety of -42.2% at the current price. The reverse DCF implies growth of 11.7% a year, while revenue has compounded at -2.4% over five years and free cash flow per share at -0.5%.

What holds the case up is cash conversion: free cash flow was 1.93 times net income over the trailing twelve months, the Piotroski score is 7 out of 9, and the share count has shrunk at 2.0% a year over five years. What would break it is returns and growth: ROIC of 7.1% sits below a WACC of 7.9%, net debt to EBITDA is 3.18, and EPS has compounded at -8.2% over five years.

Financial health

The colour is yellow: the current ratio of 1.29 and quick ratio of 1.25 support liquidity, while net debt to EBITDA of 3.18 and interest coverage of 4.06 are both flagged as watch items, and debt to equity of 1.24 adds to the pressure. The Altman Z-score is 2.93, in the grey zone. That model was designed for manufacturers, and this company is an engineering and consulting business, so the score is only a rough guide. Insolvency risk: low, about 1.1% by the estimate of the Ohlson model over one to two years.

Earnings quality

The colour is green: free cash flow conversion is 1.93 times over the trailing twelve months and 1.17 times over five years, and the accrual ratio of -3.5% shows reported earnings backed by cash. Stock-based compensation is 0.5% of revenue, and free cash flow after it is 574.1 million USD. The share count has fallen at 2.0% a year over five years, which points to buybacks. The Piotroski score is 7 out of 9. The Beneish M-score is not available. The company beat estimates in 6 of the last 8 quarters, with an average surprise of 3.5%. Current-year estimates were revised up 0.7% over 90 days, with two downgrades and no upgrades in the last 30 days. Next-year estimates moved 0.1% over 90 days, with four downgrades and one upgrade, and the next-year EPS growth estimate is 13.4%.

Profitability

The colour is yellow: the gross margin of 22.1% is above its ten-year median of 20.5%, and the operating margin of 4.6% matches its median of 4.6%. The net margin of 2.4% is below its median of 3.5%. ROIC is 7.1% against a WACC of 7.9%, so ROIC minus WACC is -0.8%, a neutral reading, and the five-year median ROIC is 5.7%. Return on equity of 10.3% is flattered by leverage. The DuPont split for the year to September 2025 shows a net margin of 2.41%, asset turnover of 1.07 and an equity multiplier of 3.09, so most of the equity return comes from borrowing rather than from margins.

Growth

The colour is red: revenue compounded at 7.1% over three years, but at -2.4% over five years and -0.1% over ten. EPS compounded at -21.4% over three years, -8.2% over five years and 0.1% over ten. Free cash flow per share grew 23.6% over three years, fell 0.5% over five and rose 4.9% over ten. Revenue grew in 6 of the 10 comparable years. The next-year EPS growth estimate of 13.4% is the one growth signal assessed as good.

Valuation

The colour is red: every multiple sits above its ten-year median. The price-to-earnings ratio of 55.2 is 98.7% above its median of 27.8, EV to EBITDA of 23.6 is 27.6% above 18.5, price to free cash flow of 28.7 is 38.2% above 20.7, price to sales of 1.30 is 10.9% above 1.17, and price to book of 5.66 is 131.6% above 2.44. The DCF gives 67.55 USD per share at a discount rate of 8.9%, with 53% of the value in the terminal value, 0% growth in the first phase and 2.5% in the terminal phase. The reverse DCF implies 11.7% growth against five-year revenue growth of -2.4%. The dividend yield is 0.9%, the forward yield 1.0%, and the payout on free cash flow 25.1%. The fair value is an order of magnitude built on fixed assumptions, including a 5% equity risk premium and capped growth. It is not a price target.

Risks

The main weak numbers are: ROIC below WACC, which means returns do not yet cover the cost of capital; net debt to EBITDA of 3.18, which limits flexibility if earnings keep falling; EPS down 8.2% a year over five years; and price to book of 5.66 against a median of 2.44. Next-year estimates are being cut more often than raised. The Beneish M-score is not available. This analysis has no debt maturity schedule and no revenue by segment, and the fair value depends on fixed assumptions that a different discount rate or growth path would move.