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Fabrinet Stock Upgraded (FN)

NEW YORK (TheStreet) -- Fabrinet (NYSE:FN) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the Electronic Equipment, Instruments & Components industry average, but is less than that of the S&P 500. The net income increased by 3.0% when compared to the same quarter one year prior, going from $15.21 million to $15.66 million.
  • The revenue growth significantly trails the industry average of 41.1%. Since the same quarter one year prior, revenues slightly increased by 7.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • FABRINET's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. During the past fiscal year, FABRINET increased its bottom line by earning $1.87 versus $1.31 in the prior year.
  • FN's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 30.59%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The gross profit margin for FABRINET is currently extremely low, coming in at 12.30%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 8.40% is above that of the industry average.
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Fabrinet provides precision optical, electro-mechanical, and electronic manufacturing services to original equipment manufacturers (OEMs) of optical communication components, modules and sub-systems, and industrial lasers and sensors. The company has a P/E ratio of 9.4, above the average consumer durables industry P/E ratio of 9.1 and below the S&P 500 P/E ratio of 17.7. Fabrinet has a market cap of $588.5 million and is part of the consumer goods sector and consumer durables industry. Shares are up 32.7% year to date as of the close of trading on Monday.

You can view the full Fabrinet Ratings Report or get investment ideas from our investment research center.
-- Written by a member of TheStreet RatingsStaff

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