Is It Too Late To Consider Fabrinet (FN) After A 169% One Year Surge?

• If you are wondering whether Fabrinet's share price still reflects fair value after a strong run, you are not alone. This article will focus squarely on what you might be paying for today.
• Fabrinet recently closed at US$576.71, with returns of 16.4% over 7 days, 23.5% over 30 days, 20.3% year to date and 169.0% over 1 year, which naturally raises questions about growth potential and changes in perceived risk.
• Recent coverage around Fabrinet has focused on its position in optical and electronics manufacturing services, as investors pay close attention to how it fits into longer term technology trends. This context helps explain why the stock has been in focus and why pricing is under closer scrutiny.
• Despite this attention, Fabrinet currently has a valuation score of 0 out of 6. Next, we will look at what different valuation methods are implying about the share price today and then finish with a way to assess value that pulls all of these pieces together.

Fabrinet scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Fabrinet Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a business could be worth by projecting its future cash flows and then discounting those back to today’s value. It is essentially asking what all those future dollars are worth in today’s terms.

For Fabrinet, the model used is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections in US$. The latest twelve month free cash flow is reported at about $155.9 million. Analysts provide explicit forecasts for the early years, then Simply Wall St extrapolates beyond that, with the ten year path including projected free cash flow of $522.0 million in 2028 and discounted values for each year out to 2035.

When these projected cash flows are added together and discounted, the model arrives at an estimated intrinsic value of about $325.68 per share. Compared with the recent share price of US$576.71, the DCF output suggests Fabrinet is around 77.1% overvalued on this measure alone.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Fabrinet may be overvalued by 77.1%. Discover 56 high quality undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Fabrinet.

Approach 2: Fabrinet Price vs Earnings (P/E)

For a profitable company like Fabrinet, the P/E ratio is a useful way to think about value because it tells you how many dollars you are paying for each dollar of earnings. It is a quick check on whether expectations built into the price look modest or demanding.

What counts as a “normal” P/E depends on what investors expect from a business and how risky they think it is. Higher growth expectations or lower perceived risk can justify a higher P/E, while slower growth or higher risk usually points to a lower P/E.

Fabrinet currently trades on a P/E of 54.80x, compared with about 41.0x for peers and an industry average of 27.32x for Electronic stocks. Simply Wall St’s Fair Ratio for Fabrinet is 36.94x, which is its proprietary view of what the P/E might be given the company’s earnings growth profile, industry, profit margins, market cap and risk factors. This Fair Ratio can be more informative than a simple peer or industry comparison because it adjusts for those business specific characteristics rather than assuming all companies deserve similar multiples. On this measure, Fabrinet’s current P/E is higher than the Fair Ratio, which points to the shares looking overvalued on a P/E basis today.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Fabrinet Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, which let you attach a clear story about Fabrinet to the numbers you care about. You can link your view of its future revenue, earnings and margins to a financial forecast, a Fair Value estimate, and then a simple comparison with today’s price. All of this is available inside Simply Wall St’s Community page, where Narratives update automatically when new news or earnings arrive. You can see, for example, one investor arguing that a Fair Value around US$600.00 makes sense based on their assumptions, while another argues for closer to about US$324.57. You can then use that spread to decide where your own view sits and how the gap between price and Fair Value might guide your investment decisions over time.

For Fabrinet however, we will make it really easy for you with previews of two leading Fabrinet Narratives:

🐂 Fabrinet Bull Case

Fair value in this bullish narrative: US$600.00 per share

Implied undervaluation versus the last close of US$576.71: about 3.9% below that fair value estimate

Revenue growth assumption: 21.31% per year

• Backers of this view focus on Fabrinet's role in advanced optical manufacturing, its partnerships, and expansion into high growth verticals such as AI data centers and automotive infrastructure.
• The narrative leans on assumptions for multi year revenue growth, steady profit margins, ongoing share repurchases and a forward P/E of 37.24x to support a Fair Value of US$600.00.
• Key risks highlighted include heavy customer concentration, rising capital and labor costs, rapid technology shifts in datacom and telecom, and geopolitical or supply chain pressures that could weigh on margins and free cash flow.

🐻 Fabrinet Bear Case

Fair value in this bearish narrative: about US$324.57 per share

Implied overvaluation versus the last close of US$576.71: about 77.7% above that fair value estimate

Revenue growth assumption: 19.15% per year

• This view leans on concerns that geopolitical tensions, regulatory costs, rising wages and increasing automation could pressure Fabrinet's existing manufacturing model and profitability.
• It assumes revenue and earnings growth but pairs that with a lower forward P/E of 20.46x and a Fair Value of about US$324.57, arguing that current pricing builds in expectations that may be hard to sustain.
• Supporters of this case still recognize demand for high speed optics and data center products, but think customer concentration, cost inflation and potential margin compression could limit long term share price potential from current levels.

If you want to see how these bullish and bearish stories are built from the same underlying numbers, you can compare them side by side inside the Fabrinet Community Narratives and pressure test which assumptions line up better with your own view of the business, its risks and the price you are willing to pay.

Curious how numbers become stories that shape markets? Explore Community Narratives

Do you think there's more to the story for Fabrinet? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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