Fabrinet Stock Upgraded (FN)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Fabrinet (NYSE: FN) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, attractive valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 0.6%. Since the same quarter one year prior, revenues rose by 11.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • FN's debt-to-equity ratio is very low at 0.10 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, FN has a quick ratio of 1.86, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, FABRINET's return on equity exceeds that of both the industry average and the S&P 500.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
.

Fabrinet provides optical packaging and 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 eight, below the S&P 500 P/E ratio of 17.7. Fabrinet has a market cap of $487.5 million and is part of the consumer goods sector and consumer durables industry. Shares are up 7.8% year to date as of the close of trading on Wednesday.

You can view the full Fabrinet Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

3x UPSIDE POTENTIAL: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more..
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

If you liked this article you might like

Verizon and Facebook Spending Plans Give Strong Clues to Tech Earnings

Verizon and Facebook Spending Plans Give Strong Clues to Tech Earnings

The Big Implications of Verizon and Facebook's Very Different Spending Plans

The Big Implications of Verizon and Facebook's Very Different Spending Plans

Optical Component Stocks Are Worth a Look Following Finisar's Tumble

Optical Component Stocks Are Worth a Look Following Finisar's Tumble

Optical Component Stocks Might Deserve a Look Following Finisar's Tumble

Optical Component Stocks Might Deserve a Look Following Finisar's Tumble

Why Telecom Equipment Giants Are Struggling, but Their Suppliers Are Thriving

Why Telecom Equipment Giants Are Struggling, but Their Suppliers Are Thriving