NEW YORK ( TheStreet) -- Fabrinet (NYSE: FN) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself and poor profit margins. Highlights from the ratings report include:
- 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 25.22%, 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 12.60%. Regardless of FN's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, FN's net profit margin of 8.70% compares favorably to the industry average.
- Net operating cash flow has significantly increased by 1034.69% to $16.68 million when compared to the same quarter last year. In addition, FABRINET has also vastly surpassed the industry average cash flow growth rate of -67.20%.
- FABRINET has improved earnings per share by 20.0% in the most recent quarter compared to the same quarter a year ago. 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.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Electronic Equipment, Instruments & Components industry average. The net income increased by 22.7% when compared to the same quarter one year prior, going from $13.57 million to $16.66 million.