FABRINET (FN): what the price requires
At today's price, FABRINET (FN) is priced for today's economics sustained for ~12.7 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-19 · Source: https://boothcheck.com/report/FN
Headline
| Field | Value |
|---|---|
| Ticker | FN |
| Company | FABRINET |
| Current price | $471.96/sh |
| Composition | Optical communications 77% / Non-optical communications 23% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 8.0% |
| Operating margin today | 9.7% |
| Margin compression implied | -1.7pp |
| Must persist for | 12.7y |
| Multiple paid | 39x operating income |
The operating-margin requirement is derived from the framework's value band at year 9, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 11.5% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~2.2 years.
Reconcile: at the x-ray's 9.3% required return this reads ~8.1 years; the models below use their own rates.
How unusual the bet is: elevated
| Reference | Value |
|---|---|
| vs own history | +0.33σ |
| cohort percentile (of 178 peers) | 70 |
| sustained it ~10 years at this level | 15% |
| implied end-window share | 0% |
Valuation X-Ray
Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 3.66x | 5 | expensive |
| Earnings | 3.75x | 3 | expensive |
| Relative | 1.34x | 5 | expensive |
| Growth | 0.96x | 3 | justifies |
Families that justify the price: Growth Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.2%); the inversion above states its own rate.
Per-Model Detail (n=16)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $276.28 | 1.71x | yes | FCF base $0.3B, growth 25% (input: historical growth), terminal g 4.0%, WACC 9.2%, 7yr projection |
| DCF Exit Multiple | Growth | $489.66 | 0.96x | yes | Exit EV/EBITDA: 35.9x / 38.9x / 41.9x (bear / base = today's held flat / bull), 7yr |
| Relative Valuation | Relative | $352.00 | 1.34x | yes | P/E 28x (static sector reference · 2026-04), scenarios: 22.4x / 28.0x / 33.6x (bear / base = reference held flat / bull), EV/EBITDA 25.67x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $125.37 | 3.76x | yes | BV/sh $63.49, ROE (TTM) 18.3%, ke 9.3% |
| Two-Stage Excess Return | Asset | $173.98 | 2.71x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $636.48 | 0.74x | yes | Rev $4.2B, growth 29% (input: historical growth; tapered), Terminal P/S: 3.2x / 4.0x / 4.9x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $341.48 | 1.38x | yes | EPS $11.63, growth 29% (input: historical EPS growth), PEG=1.39 (Fair) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $83.37 | 5.66x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.29B × (1−7%) / WACC 9.2% → EPV (no growth) |
| Residual Income | Asset | $172.32 | 2.74x | yes | BV $63.49 + 5yr PV of (ROE (TTM) 18.3% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $128.89 | 3.66x | yes | √(22.5 × EPS $11.63 × BVPS $63.49) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $246.67 | 1.91x | yes | EBITDA $0.43B × sector EV/EBITDA 20.0x |
| FCF Yield | Earnings | $22.00 | 21.45x | yes | FCF $45.8M / Kₑ 9.3% — zero-growth perpetuity (excluded from median) |
| SBC-Adj FCF Yield | Earnings | $11.73 | 40.24x | yes | SBC-adj FCF $0.01B (FCF $0.05B − SBC $0.03B) capitalized at Kₑ (excluded from median) |
| Ben Graham Formula | Earnings | $375.26 | 1.26x | yes | EPS $11.63 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $38.46 | 12.27x | yes | BV $63.49 × (ROIC 5.6% / WACC 9.2%) |
| P/Sales Sector | Relative | $699.98 | 0.67x | yes | Revenue $4.24B × sector P/S 6.0x |
| PEG Fair Value | Relative | $436.13 | 1.08x | yes | EPS $11.63 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $125.73 | 3.75x | yes | EPS $11.63 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net cash | $945.2m |
| Net debt / NOPAT (after-tax) | -2.49x (net cash) |
| Net debt / operating income (pre-tax) | -2.32x (net cash) |
| Share count CAGR (buyback) | -0.8% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
Fabrinet's moat is precision optical manufacturing at a scale no rival matches, and the returns prove it: a trailing return on equity around 18% on a net-cash balance sheet, earned by building the advanced optical modules that route AI-datacenter traffic.
The price near $573.90 is a full one. It works out to about 48 times operating income, and the inversion reads that as elevated: the price implies the company holds a high growth rate near its self-funding ceiling for roughly fifteen years, a pace only about 15% of comparable fast-growers have sustained for even a decade.
The recent results are why the market pays up. Revenue grew 39% to a record in the latest quarter, driven by data-center interconnect demand nearly doubling year over year. The bet is that the AI optics buildout keeps Fabrinet's order book full; the risk is that it depends on a handful of customers and a single end-market cycle.
Bull Case
Fabrinet's competitive advantage is the hardest kind to replicate: physical scale and accumulated know-how in precision optical packaging. It is the contract manufacturer that the optical-equipment makers and, increasingly, the hyperscalers and chip companies rely on to build complex optical modules in volume. The economics show the moat is real. Trailing return on equity is around 18%, well above the cost of capital, earned while holding net cash of roughly $945 million, so the returns are not leverage-driven. The filing frames the franchise around OEMs "recognizing the benefits of outsourcing that OEMs in other industries" have achieved, and describes how Fabrinet takes a "customer's internal prototype" through "product qualification and volume production" [FY2025 10-K, accession 0001408710-25-000039]. Once a customer qualifies a product on Fabrinet's lines, moving it is slow, costly, and risky, which is the source of the stickiness.
The demand backdrop is the strongest it has ever been. Fabrinet sits directly in the AI-datacenter optics buildout, making the advanced transceivers and data-center-interconnect modules that move the enormous traffic AI training and inference generate. In the quarter ended March 2026 revenue grew 39% year over year to a record $1,214.3 million with non-GAAP earnings of $3.72 a share, ahead of expectations, and data-center-interconnect revenue surged about 90% year over year to $197 million on demand for 400ZR and 800ZR modules. The prior quarter set a record at $1.13 billion. This is not a story of margin recovery; it is a story of volume growth with margins holding.
The forward pipeline extends the runway and the moat. Fabrinet has launched two datacom transceiver programs with a hyperscale customer and secured multiple merchant transceiver programs for datacenter scale-out, with manufacturing targeted for early fiscal 2027, and it made a $32 million minority investment in Raytec Semiconductor to deepen its role in co-packaged optics, the next architecture for moving light closer to the chip. A net-cash balance sheet funds that expansion without dilution. With analysts broadly positive and price targets that in some cases sit above the current price, the bull case is simply that the AI optics demand and Fabrinet's irreplaceable manufacturing position keep compounding.
Bear Case
The bear case starts with the competition and the customers, not the multiple. Fabrinet's largest customers are concentrated, and several of them, including vertically integrated optical-equipment makers like Lumentum and Ciena that appear in its peer set, both buy from Fabrinet and have the capability to build in-house. The 10-K is unambiguous that this is the central risk: "our sales depend on a small number of customers," and "because we depend upon a small number of customers for a significant percentage of our total revenues, a reduction in orders from, a loss of, or any other adverse actions by" one of them would hurt materially [FY2025 10-K, accession 0001408710-25-000039]. The same AI-optics boom that powers the bull case also attracts the customers' own capital toward bringing more manufacturing in-house, and a single large customer deciding to dual-source or insource a major program would dent Fabrinet's growth.
The end-market concentration compounds the customer concentration. Fabrinet's surge is overwhelmingly an AI-datacenter story, with data-center-interconnect revenue nearly doubling and optical communications the dominant segment. That is wonderful while AI capital spending is climbing, but it ties the company to a single, famously cyclical investment cycle. Optical components have a long history of brutal boom-bust dynamics; when a buildout phase ends, orders can fall fast, and Fabrinet's revenue would follow. The technology itself is a risk: co-packaged optics, the very architecture Fabrinet is investing in, could over time change where the value sits in the optical stack and pressure the discrete-module business that drives today's revenue.
Only against that backdrop does the valuation become the concern. At about $573.90 (June 27, 2026) the price is roughly 48 times operating income, and the inversion implies the company must sustain growth near its self-funding ceiling for about fifteen years, a pace only about 15% of comparable fast-growers have held for even ten years. The conservative methods sit far below: the asset-based frames land near $125 to $174 off a book value of $63.49, the earnings-power frame lands near $83, and only the growth-DCF frames reach the price. That is a durability premium, and durability is exactly what customer concentration and a single end-market cycle put at risk. A growth disappointment from any of those sources, against a 48-times multiple, would be punished hard.
Valuation
Fabrinet is valued as a whole company off its operating income, and the read is elevated. At about $573.90 the price works out to roughly 48 times company-wide operating profit, which inverts to an assumption that the company holds growth near its self-funding ceiling for about fifteen years. That is a single solve under an 11.7% cost of capital with growth searched to a 25% ceiling, so it is approximate, but the magnitude is clear: the price requires a long runway of fast compounding, and the framework notes only about 15% of comparable fast-growers sustained that pace for even ten years.
The X-ray is one-sided in a way the characterization names directly: asset, earnings-power, and most peer-multiple frames all say the stock is richly valued, and only the growth-DCF frames reach the price. The asset-based methods, simple and two-stage excess return, land near $125 to $174 off a strong book value of $63.49 and an 18% return on equity, residual income lands near $172, and the earnings-power frame lands near $83. The relative methods on blended multiples land in the $340 to $440 range, still below the price. The DCF-exit-multiple frame, on a high exit multiple, is the one that reaches near the current price. So the price is paying for durable compounding that the static frames cannot capture, a moat and durability premium.
The honest synthesis is that the valuation is defensible only if the AI-optics growth proves durable and Fabrinet keeps its manufacturing position. The business is genuinely high-quality: strong returns, net cash, record growth, and a sticky outsourcing model. But the price gives full credit for roughly fifteen years of fast growth, and the conservative methods anchored to the company's real book value and earnings power sit well below it. The valuation rewards continuation of the buildout and punishes any deceleration; the next few quarters of order trends and any signal on customer in-housing are the tests.
Catalysts
The most recent catalyst was the fiscal third-quarter 2026 report for the period ended March 27, 2026, which was a record. Fabrinet delivered revenue of $1,214.3 million, up 39% year over year, and non-GAAP earnings of $3.72 a share, beating estimates, with data-center-interconnect revenue surging about 90% year over year to $197 million on strong 400ZR and 800ZR module demand. The prior quarter had also set a record at $1.13 billion. Each quarterly print is the key checkpoint on whether the AI-optics demand and margin profile hold.
The forward growth catalysts are new programs and new architectures. Fabrinet has launched two datacom transceiver programs with a hyperscale customer and secured multiple merchant transceiver programs for datacenter scale-out, with manufacturing targeted for early fiscal 2027, so the ramp of those programs is a visible 2027 driver. The $32 million minority investment in Raytec Semiconductor positions Fabrinet in co-packaged optics, the next step in the technology roadmap, and progress there is a longer-term catalyst.
The swing factors are the same ones that anchor the bear case. Customer concentration means any change in ordering from a top customer, including a decision to insource, is a material event. The AI-datacenter capital-spending cycle is the macro driver, and any sign of digestion or slowdown in hyperscaler optics spending would weigh on the stock. Analyst sentiment is broadly positive, with a buy-leaning consensus and price targets that in several cases sit above the current price, including a Rosenblatt target of $750, which sets a high bar for results to keep clearing.
Sources: Fabrinet Q3 FY2026 8-K, SEC; Fabrinet Q3 FY2026 39% growth, AI compute gains, Investing.com; Fabrinet Q3 2026 earnings transcript, Motley Fool; Fabrinet bets on co-packaged optics, Raytec investment, Yahoo Finance; Fabrinet AI optics, analyst targets, Globe and Mail.
Peer Cohorts (Per Segment, With Filing Citations)
Fabrinet (single operating segment) (reported)
- LITE (Lumentum Holdings Inc.)
- FY2025 10-K: …represented 13 % of gross accounts receivable. We rely on a limited number of suppliers for a number of key components contained in our products. We also rely on a limited number of significant independent contract manufacturers for the production of certain key components and subassemblies contained in our products.…
- FY2025 10-K: …for the year ended June 29, 2024. Refer to "Note 4. Business Combination" to the consolidated financial statements for additional information. Supply Chain and Inventory Management Our supply chain is complex, and we need to manage supply of certain components required to build our products while confronted with…
- CIEN (Ciena Corp)
- FY2025 10-K: …in research and development activities, an increase of 11% compared to fiscal 2024. We believe that our investment capacity and our efforts to push the pace of innovation are important competitive differentiators in our markets, which requires considerable investment capacity and expenditures. In particular, in an…
- FY2025 10-K: …the Consolidated Statements of Operations. • Blue Planet Automation Software and Services revenue reflects sales of Blue Planet Automation Software and Blue Planet Services. • Blue Planet Automation Software - includes inventory management, orchestration, route optimization and analysis, and unified assurance and…
- ADTN (ADTRAN Holdings, Inc.)
- FY2025 10-K: …inputs that are observable; values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly; • Level 3 - Significant unobservable inputs; values based on prices or valuation techniques that require inputs that are both unobservable and significant to the…
- FY2025 10-K: …standard-setting bodies such as the ITU-T, ATIS, ETSI and the BBF. We are involved in the evolution of optical access technologies on next-generation PON. We also continue to be involved in driving optical networking, synchronization and SDN standardization and participate in industry-wide interoperability,…
- ESE (ESCO TECHNOLOGIES INC.)
- FY2025 10-K: …except as the context may otherwise indicate, includes ETS-Lindgren Inc., MPE Limited (MPE) and ESCO's other Test segment subsidiaries Our operating subsidiaries are engaged primarily in the research, development, manufacture, sale and support of the products and systems described below. Their respective businesses…
- FY2025 10-K: …industry, primarily wind and solar. The Test segment's operations consist of ETS-Lindgren Inc., including its related subsidiaries, and MPE Limited (collectively, ETS - Lindgren). ETS-Lindgren is an industry leader in designing and manufacturing products and systems to measure and control RF energy. It serves the…
- UI (UBIQUITI INC.)
- FY2025 10-K: …false 2025 FY 0001511737 P1Y http://fasb.org/us-gaap/2025#OtherLiabilitiesCurrent http://fasb.org/us-gaap/2025#OtherLiabilitiesCurrent iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure ubnt:subsidiary ubnt:segment 0001511737 2024-07-01 2025-06-30 0001511737 2024-12-31 0001511737 2025-08-21 0001511737…
- FY2025 10-K: …and the Company's user community where customers can interface directly with our R&D, marketing, and support teams. Our technology platforms were designed from the ground up with a focus on delivering highly-advanced and easily-deployable solutions that appeal to a global customer base. 4 Table of Contents We offer a…
- GILT (GILAT SATELLITE NETWORKS LTD.)
- FY2025 20-F: …network maintenance, field services and repair services. In certain contracts, the company also provides a service-type warranty that is accounted for as a separate performance obligation, and revenue is recognized ratably over the life of the warranty as the customer consumes the benefit over the service term. F -…
- FY2025 20-F: …not distinct from one another due to a customer defined interrelated operational performance requirement, a highly complex interrelated and integrated output and significant contract management requirements. The promises to provide operation and maintenance services are distinct performance obligations. F - 18 GILAT…
- MSI (MOTOROLA SOLUTIONS, INC.)
- FY2025 10-K: …financial statements. The goodwill impairment assessment is performed at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment (referred to as a "component"). A component of an operating segment is a reporting unit if the component constitutes a business for which…
- FY2025 10-K: …operations in 2023 that did not occur in 2024 (see "Property, Plant and Equipment, Net" within "Note 4: Other Financial Data" to our consolidated financial statements in "Part II. Item 8. Financial Statements and Supplementary Data" of this Form 10-K for further information); and • $2 million of environmental reserve…
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.