Fabrinet reports 43.7% Net Income growth in 2019 and 15.5% Revenue growth
08/19/2019 • About Fabrinet (
$FN) • By InTwits
Fabrinet reported FY2019 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Fabrinet is a fast growth stock: FY2019 revenue growth was 15.5%, 5 year revenue CAGR was 18.5% at FY2019 ROIC 14.2%
- EBITDA Margin is relatively stable: 9.6% in FY2019 vs. 9.0% in FY2018 vs. 7.8% in FY2015
- Fabrinet has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.9%. At the same time it's in pair with industry average of 3.5%
- CAPEX is quite volatile: $19m in FY2019, $34m in FY2018, $68m in FY2017, $41m in FY2016, $51m in FY2015
- The company has highly profitable business model: ROIC is 14.2%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Fabrinet's Revenue jumped on 15.5%. Revenue growth showed acceleration in FY19Q4 - it increased 17.3% YoY. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 2.6 pp from 41.8% to 39.2% in FY2019. EBITDA Margin stuck to a growing trend at 0.38 pp per annum in FY2015-FY2019.
Gross Margin showed almost no change in FY2019. SG&A as a % of Revenue decreased slightly on 0.74 pp from 4.2% to 3.5% in FY2019. SG&A as a % of Revenue stuck to a declining trend at -0.41 pp per annum in the last 5 years.
Net Income margin increased slightly on 1.5 pp from 6.1% to 7.6% in FY2019.
Investments (CAPEX, working capital and M&A)
In FY2019 the company had CAPEX/Revenue of 1.2%. The company's CAPEX/Revenue decreased on 3.0 pp from 4.2% in FY2016 to 1.2% in FY2019. For the last three years the average CAPEX/Revenue was 2.8%. CAPEX as a % of Revenue stuck to a declining trend at -1.3 pp per annum in the last 5 years.
Return on investment
The company operates at good ROIC (14.2%) and ROE (15.1%). ROIC increased on 2.2 pp from 12.0% to 14.2% in FY2019. ROE increased on 3.2 pp from 11.8% to 15.1% in FY2019.
Leverage (Debt)
Company's Net Debt / EBITDA is -0.8x and Debt / EBITDA is 0.4x. Debt decreased on 5.7% while cash jumped on 14.4%.
Fabrinet has no short term refinancing risk: cash is higher than short term debt (4,957.2%).
Valuation and dividends
Fabrinet's trades at EV/EBITDA 12.5x and P/E 16.8x.
Financial and operational results
FY ended 06/28/2019
Fabrinet ($FN) key annual financial indicators| mln. $ | 2015 | 2016 | 2017 | 2018 | 2019 | 2019/2018 |
|---|
P&L
|
|---|
| Revenue | 774 | 977 | 1,420 | 1,372 | 1,584 | 15.5% |
| Gross Profit | 88 | 120 | 171 | 153 | 179 | 16.8% |
| SG&A | 39 | 50 | 66 | 58 | 55 | -4.7% |
| EBITDA | 60 | 87 | 130 | 123 | 153 | 24.1% |
| EBIT | 47 | 70 | 106 | 94 | | |
| Interest expence | 1 | 2 | 3 | 4 | | |
| Tax | 4 | 6 | 7 | 4 | | |
| Net Income | 44 | 62 | 97 | 84 | 121 | 43.7% |
| Stock Based Compensation | 8 | 10 | 27 | 23 | | |
Balance Sheet
|
|---|
| Cash | 113 | 143 | 134 | 158 | 181 | 14.4% |
| Accounts Receivable | 135 | 196 | 264 | 247 | | |
| Inventory | 131 | 181 | 239 | 258 | | |
| Accounts Payable | 115 | 172 | 215 | 220 | | |
| Short Term Debt | 36 | 24 | 49 | 4 | 4 | -1.4% |
| Long Term Debt | 5 | 36 | 24 | 61 | 58 | -6.0% |
Cash flow
|
|---|
| Capex | 51 | 41 | 68 | 34 | 19 | -44.8% |
Ratios
|
|---|
| Revenue growth | 14.1% | 26.3% | 45.4% | -3.4% | 15.5% | |
| EBITDA growth | -41.1% | 45.0% | 48.7% | -5.2% | 24.1% | |
|
|---|
| Gross Margin | 11.3% | 12.2% | 12.1% | 11.2% | 11.3% | 0.1% |
| EBITDA Margin | 7.8% | 8.9% | 9.1% | 9.0% | 9.6% | 0.7% |
| EBIT Margin | 6.1% | 7.1% | 7.5% | 6.8% | |
| SG&A, % of revenue | 5.1% | 5.1% | 4.6% | 4.2% | 3.5% | -0.7% |
| SBC, % of revenue | 1.0% | 1.0% | 1.9% | 1.6% | |
| Net Income Margin | 5.6% | 6.3% | 6.8% | 6.1% | 7.6% | 1.5% |
| CAPEX, % of revenue | 6.6% | 4.2% | 4.8% | 2.5% | 1.2% | -1.3% |
|
|---|
| ROIC | 9.8% | 12.3% | 15.4% | 12.0% | 14.2% | 2.2% |
| ROE | 9.6% | 12.0% | 15.7% | 11.8% | 15.1% | 3.2% |
| Net Debt/EBITDA | -1.2x | -0.9x | -0.5x | -0.8x | -0.8x | -0.0x |
| Interest expence / Average debt | 1.5% | 3.1% | 5.0% | 5.2% | | |
People
|
|---|
| Insider ownership | 1.7% | 1.7% | 1.7% | 1.7% | | |
| Employees | | 9,330 | 10,541 | 10,579 | | |
| Revenue/Employee, th. $ | | 105 | 135 | 130 | | |
Fabrinet ($FN) key quoterly financial indicators
| mln. $ | FY19Q1 | FY19Q2 | FY19Q3 | FY19Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 377 | 403 | 399 | 405 | | 5.5% | 19.6% | 20.1% | 17.3% |
| EBITDA | 33 | 40 | 40 | 39 | | 2.9% | 37.6% | 26.8% | 29.0% |
| Net Income | 28 | 32 | 29 | 33 | | 33.1% | 65.7% | 37.7% | 44.9% |
Balance Sheet
|
|---|
| Cash | 220 | 231 | 166 | 181 | | 97.1% | 71.3% | 16.6% | 14.5% |
| Short Term Debt | 4 | 4 | 4 | 4 | | -91.6% | -92.4% | -92.4% | 8.1% |
| Long Term Debt | 61 | 60 | 59 | 58 | | 200.4% | 258.7% | 344.7% | -5.6% |
Ratios
|
|---|
| Gross Margin | 11.0% | 11.0% | 12.0% | 12.0% | | -0.3% | -0.0% | 0.9% | 0.7% |
| EBITDA Margin | 8.8% | 9.9% | 10.0% | 9.6% | | -0.2% | 1.3% | 0.5% | 0.9% |
| Net Income Margin | 7.4% | 7.9% | 7.3% | 8.1% | | 1.5% | 2.2% | 0.9% | 1.6% |
Peers in Electronic Manufacturing Services
Below we provide Fabrinet benchmarking against other companies in Electronic Manufacturing Services industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| RF Industries, Ltd. ($RFIL) | 41.9% | -7.8% | -24.0% | 118.4% | |
| Alpine 4 Technologies Ltd ($ALPP) | | 35,893.8% | 5.8% | 71.5% | |
| Kemet Corporation ($KEM) | -1.3% | -10.7% | 3.1% | 58.4% | |
| SMTC Corporation ($SMTX) | -3.5% | -23.9% | -17.1% | 55.2% | |
| Deswell Industries, Inc. ($DSWL) | | 17.1% | -0.1% | 36.3% | 9.7% |
| |
|---|
| Median (27 companies) | 2.6% | 0.6% | 1.9% | 9.8% | 12.1% |
|---|
| Fabrinet ($FN) | | 26.3% | 45.4% | -3.4% | 15.5% |
Top companies by Gross margin, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Neonode Inc. ($NEON) | 66.0% | 86.9% | 77.1% | 89.2% | |
| Andrea Electronics Corp ($ANDR) | 99.1% | 88.5% | 96.2% | 70.4% | |
| Data I/O Corporation ($DAIO) | 52.4% | 55.0% | 58.9% | 59.4% | |
| IPG Photonics Corporation ($IPGP) | 54.6% | 54.9% | 56.6% | 54.8% | |
| CTS Corporation ($CTS) | 33.2% | 35.4% | 33.2% | 35.1% | |
| |
|---|
| Median (27 companies) | 22.1% | 22.2% | 15.8% | 15.2% | 11.5% |
|---|
| Fabrinet ($FN) | 11.3% | 12.2% | 12.1% | 11.2% | 11.3% |
Top companies by EBITDA margin, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| IPG Photonics Corporation ($IPGP) | 42.4% | 41.8% | 44.7% | 40.9% | |
| TE Connectivity Ltd. ($TEL) | 19.3% | 20.9% | 20.4% | 21.4% | |
| CTS Corporation ($CTS) | 9.0% | 20.7% | 14.0% | 17.8% | |
| Methode Electronics, Inc. ($MEI) | 15.4% | 16.5% | 16.5% | 16.1% | |
| RF Industries, Ltd. ($RFIL) | 6.7% | -12.1% | 3.1% | 15.9% | |
| |
|---|
| Median (27 companies) | 4.8% | 4.8% | 4.5% | 4.7% | 4.9% |
|---|
| Fabrinet ($FN) | 7.8% | 8.9% | 9.1% | 9.0% | 9.6% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Maxwell Technologies, Inc. ($MXWL) | 2.5% | 4.9% | 6.6% | 11.3% | |
| IPG Photonics Corporation ($IPGP) | 7.8% | 12.6% | 9.0% | 11.0% | |
| eMagin Corporation ($EMAN) | 4.7% | 6.7% | 6.2% | 8.8% | |
| TE Connectivity Ltd. ($TEL) | 4.9% | 5.3% | 5.6% | 6.7% | |
| CTS Corporation ($CTS) | 2.5% | 5.2% | 4.3% | 6.1% | |
| |
|---|
| Median (27 companies) | 2.3% | 2.8% | 2.7% | 2.4% | 2.6% |
|---|
| Fabrinet ($FN) | 6.6% | 4.2% | 4.8% | 2.5% | 1.2% |
Top companies by ROIC, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| RF Industries, Ltd. ($RFIL) | 4.6% | -18.7% | 0.9% | 29.2% | |
| IPG Photonics Corporation ($IPGP) | 27.8% | 25.1% | 29.9% | 22.9% | |
| Methode Electronics, Inc. ($MEI) | 26.1% | 22.7% | 20.8% | 19.2% | |
| TE Connectivity Ltd. ($TEL) | 15.1% | 15.9% | 16.2% | 18.4% | |
| Kemet Corporation ($KEM) | 3.8% | 6.2% | 6.9% | 16.9% | |
| |
|---|
| Median (29 companies) | 4.6% | 6.2% | 4.2% | 6.4% | 8.4% |
|---|
| Fabrinet ($FN) | 9.8% | 12.3% | 15.4% | 12.0% | 14.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Alpine 4 Technologies Ltd ($ALPP) | | | 34.1x | 65.7x | |
| SigmaTron International, Inc. ($SGMA) | 4.1x | 2.4x | 3.4x | 16.0x | |
| SMTC Corporation ($SMTX) | 1.8x | 1.0x | | 11.3x | |
| IEC Electronics Corp. ($IEC) | 14.0x | 2.0x | 5.6x | 4.9x | |
| Key Tronic Corporation ($KTCC) | 3.4x | 2.6x | 2.5x | 3.9x | |
| |
|---|
| Median (22 companies) | -0.6x | 0.6x | 0.5x | 0.5x | -2.3x |
|---|
| Fabrinet ($FN) | -1.2x | -0.9x | -0.5x | -0.8x | -0.8x |
