Fabrinet (FN) is on fire after its recent earning surprise. Analysts are looking for double-digit growth over the next couple of years from this Zacks #1 Rank (Strong Buy).
Company Description
Fabrinet makes precision optical, electro-mechanical and electronic manufacturing services to OEMs, throughout the entire manufacturing process. From design to final assembly and testing.
Beat the Street
The Bangkok-based company reported second-quarter earnings results on Jan 31 that came in better than analysts expected. Revenue was up 61% to $185 million, leading to net income of just under $16 million, a 42% increase.
Earnings per share jumped to $0.46 for the period, beating the Zacks Consensus Estimate by a penny. Strength across all product areas led to the record revenues and optimistic outlook from the company.
Estimates Jump
Analysts were happy with the earnings results and raised full-year estimates right after the report. The Zacks Consensus Estimate for fiscal 2011 is up 7 cents, to $1.86 on the news. Next year’s projections are averaging $2.06, up 9 cents.
If Fabrinet can reach these levels the annual growth rates will be 32% and 11%, respectively.
Top Rated Company
On top of having a Zacks #1 Rank (Strong Buy), Fabrinet is the highest rated of the 46 companies in its industry. The company operates with a net profit margin of 8.9%, more than double the 4.4% its peers are averaging. FN has an ROE of 24.2%, miles ahead of the 8.9%, the industry norm.
China Worries
One aspect that may deter investors would be the company’s location. Several Chinese companies have turned out to be fraudulent. While Thailand is in close proximity, the issues have been isolated to China so far and there is no indication that it will spread to other Asian countries.
The Chart
Shares of FN have been on fire since its 2010 IPO. The recent earnings surprise fueled the fire, but with the bullish earnings momentum there is plenty of room to keep moving higher.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Small Cap Trader service
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