QS Research · Michael Burry's Scion Capital analyst template · 2006
Fabrinet (FN)
As of 2026-11-11 · 12/15 boxes filled from SEC filings and market data
Report price $348.52 (close 2026-11-10)
Conclusion: WATCH
Conviction low · base case +25% · downside +6% · upside +29%
Fabrinet is a good-return business (ROIC 23.1% vs WACC 15.1%) but the price is set on TTM earnings: six-year FY2021-FY2026 normalized EBIT is $278.7M and net income $283.1M against TTM EBIT of $514.7M and net income of $480.6M. Cash flow does not support the price: TTM FCF is -$190.5M, FCF yield -1.5%, owner-earnings yield 0.8%, and capex is 62% of EBITDA. The code's cases are final: base $435.81 (+25.0%) at the peer-median P/E of 29.5x (7 peers), downside $369.20 (+5.9%) at 24.65x, and upside $449.59 (+29.0%); today's P/E is 29.3x. The call is watch with low conviction.
Key numbers
- Share price: $348.52
- Market cap: $12.45B
- Latest financial period: TTM to Sep 25, 2026
- Revenue (TTM): $5.14B
- EV / EBITDA (TTM): 19.9x
- P/E (TTM): 25.9x
- FCF yield: -1.5%
- Price / book: 4.95x
- Earnings-quality flags (TTM): none flagged
- P/E, operating (tax-normalized) (TTM): 29.3x
- Revenue growth (latest fiscal year): +35.7%
- ROIC (TTM): 23.1%
- WACC: 15.1%
- Economic profit spread: +8.0 pts
The 15 boxes
- ✓ 1. Long-form business notes
Fabrinet is an outsourced advanced optical/electro-mechanical manufacturer for OEMs, with FY2026 revenue of $4.64B (+35.7% vs FY2025) and revenue mix of 47.9% data center, 33.3% communications infrastructure and 18.8% automotive/industrial/other; four customers were 10%+ of FY2026 revenue. The oldest and latest 10-Ks differ: FY2021 framed the business around low-volume/high-mix and two revenue buckets, while FY2026 describes any mix/any volume and recast revenue into three categories, with revenue and operating income rising from $1.88B/$150.8M in FY2021 to $4.64B/$462.9M in FY2026; TTM to 2026-09-25 was $5.14B/$514.7M. Cash flow is not simply trailing earnings: FY2026 operating cash flow was $256.7M against $252.5M capex, and TTM operating cash flow was $175.4M against $365.9M capex. The supplied sources do not cover FY2011-FY2012 or product/customer-level unit economics, so the stated down-cycle cannot be verified here.
- ✓ 2. Competitive advantage
Fabrinet's own 10-K argues barriers to entry (long sales cycles, precision optical/electro-mechanical capability, customer IP protection), but the numbers in the XBRL do not show a pricing-power moat: revenue went $1.88B (FY ended 2021-06-25) to $4.64B (FY ended 2026-06-26) to $5.14B TTM to 2026-09-25 while gross margin stayed near 12% throughout, and operating margin only moved from about 8% to about 10%. Its four largest customers were 57.4% of FY2026 revenue, its primary competitor is the customer's own in-house plant, and the IP it works with is licensed in and improvements are assigned to the customer. Growth is real; a durable advantage is not evidenced in these sources, and the recent cash return is being absorbed by capacity capex ($365.9M TTM against $175.4M operating cash flow).
- ✓ 3. 10-Q takeaways
Q1 FY2027 (three months ended September 25, 2026) was a record quarter: revenue $1,474.5 million, up 50.8% from $978.1 million, with data center at 52.7% of revenue and up 77.6%. Gross margin was flat at 11.8% (11.9% prior year) while operating margin edged up to 9.9% from 9.6%, so the earnings gain is volume-driven, not margin-driven. GAAP net income of $103.5 million absorbed a $21.5 million downward revaluation of non-marketable equity securities and $19.9 million of Pillar Two current tax; non-GAAP net income was $157.4 million. Cash generation fell (operating cash flow $21.3 million vs $102.6 million) as receivables and inventory built, and the company guided Q2 FY2027 revenue to $1.6-1.65 billion.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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