Fabrinet (FN) is a global manufacturing services company that specializes in precision optical, electronic, and electromechanical components. It serves industries such as telecommunications, automotive, and medical devices. Known for its expertise in high-complexity manufacturing, Fabrinet operates facilities primarily in Thailand and the U.S., offering end-to-end manufacturing and supply chain solutions.

At its most recent earnings meeting Fabrinet delivered strong financial results, exceeding market expectations in both revenue and earnings. The company achieved record revenue for the fourth consecutive quarter, totaling $753.3 million, a 15% increase year-over-year, while earnings per share (EPS) also reached a new high, coming in at $2.41. Fabrinet also announced that its Board of Directors has approved an expansion of its share repurchase program, authorizing the repurchase of up to an additional $139.5 million of Fabrinet’s ordinary shares.

Fabrinet stock has been a powerful performer over the last decade, demonstrating its secure position in the industry and its successful business execution. Over the last ten years the stock has compounded at an annual rate of 31.7%, nearly triple that of the broad market.

Image Source: Zacks Investment Research

Analysts Raise Fabrinet Earnings Estimates

Possibly reflecting such a positive quarterly report, analysts have upgraded earnings estimates for Fabrinet, giving it a Zacks Rank #1 (Strong Buy) rating.  

Excluding next year’s estimates, earnings have been revised higher unanimously and across timeframes. Current quarter earnings estimates have been boosted by 7.2% and are expected to grow 19.5% year-over-year (YoY), while FY25 earnings estimates have climbed by 5.7% and are forecast to grow 11.6% YoY.

Revenue is expected to grow 11.3% this year to $3.2 billion, while next year is expected to increase 9.6% to $3.5 billion.

Image Source: Zacks Investment Research

Fabrinet Shares Trade at a Historical Premium

As the quality of Fabrinet’s business has become more recognized by market participants its valuation has steadily climbed over the last 10 years. Today, FN is trading at a one year forward earnings multiple of 29.3x, which is well above its 10-year median of 16.6x and above the broad market average.

It is worth noting that as a company grows larger and demonstrates consistent profit growth such as Fabrinet has done it brings in a new class of investors who seek such a well-guarded business model. Because of this the appropriate earnings multiple can creep up as seen in FN. Nonetheless, its strong position was only further confirmed by the recent quarterly report. FN’s five-year median valuation was 20.1x, more closely reflecting this position of quality.