Fabrinet (FN) Soars to 52-Week High, Time to Cash Out?
Shares of Fabrinet (FN) have been strong performers lately, with the stock up 11.1% over the past month. The stock hit a new 52-week high of $187.8 in the previous session. Fabrinet has gained 45.8% since the start of the year compared to the 50% move for the Zacks Computer and Technology sector and the 17.9% return for the Zacks Electronics - Miscellaneous Components industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on November 6, 2023, Fabrinet reported EPS of $2 versus consensus estimate of $1.87.
For the current fiscal year, Fabrinet is expected to post earnings of $8.25 per share on $2.83 billion in revenues. This represents a 7.56% change in EPS on a 7.13% change in revenues. For the next fiscal year, the company is expected to earn $9.25 per share on $3.22 billion in revenues. This represents a year-over-year change of 12.16% and 13.62%, respectively.
Valuation Metrics
Fabrinet may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Fabrinet has a Value Score of B. The stock's Growth and Momentum Scores are A and F, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 22.7X current fiscal year EPS estimates, which is a premium to the peer industry average of 21.6X. On a trailing cash flow basis, the stock currently trades at 22.7X versus its peer group's average of 12.3X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Fabrinet currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Fabrinet meets the list of requirements. Thus, it seems as though Fabrinet shares could still be poised for more gains ahead.
How Does FN Stack Up to the Competition?
Shares of FN have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is OSI Systems, Inc. (OSIS). OSIS has a Zacks Rank of # 2 (Buy) and a Value Score of A, a Growth Score of B, and a Momentum Score of D.
Earnings were strong last quarter. OSI Systems, Inc. beat our consensus estimate by 7.06%, and for the current fiscal year, OSIS is expected to post earnings of $7.90 per share on revenue of $1.51 billion.
Shares of OSI Systems, Inc. have gained 12.9% over the past month, and currently trade at a forward P/E of 16.5X and a P/CF of 14.99X.
The Electronics - Miscellaneous Components industry may rank in the bottom 52% of all the industries we have in our universe, but there still looks like there are some nice tailwinds for FN and OSIS, even beyond their own solid fundamental situation.
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