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Fabrinet (FN - Free Report) reported fiscal first quarter results last week that included an earnings surprise of nearly 18%., As a result, the Zacks Consensus Estimate for the current fiscal year has improved in the past 7 days. In addition, Fabrinet’s PEG looks attractive given its earnings growth, making this Zacks #1 Rank (Strong Buy) a true value stock. FN is a provider of optical packaging and precision optical, electro mechanical and electronic manufacturing.

Q1 Results

On November 5, Fabrinet reported fiscal first quarter earnings of 33 cents per share, breezing past the Zacks Consensus Estimate by 17.9%.

Net revenue declined 14.9% year over year to $158.6 million, due primarily to reduced customer demand for Fabrinet’s optical communications manufacturing services during fiscal 2012. In addition, the temporary suspension of production in some of Fabrinet’s facilities also led to the decline of the top line.

Earnings Estimates

The Zacks Consensus Estimate for the fiscal year ending June 2013 has gained nearly 10% in the past 7 days to $1.33 per share, as the 1 estimate for the period was revised higher. For the fiscal year ending June 2014, the Zacks Consensus Estimate has remained steady at $1.48.

Attractive Valuation

Fabrinet has P/E and P/B multiples of 12.0 and 1.5, respectively. It also has an attractive P/S of 0.8 (a P/E ratio under 15.0, a P/S ratio less than 1.0 and a P/B ratio below 3.0 generally indicate value).

The return on equity (ROE) also looks attractive. It has a trailing 12-month ROE of 13.2%, compared with the peer group average of 8.8%. Fabrinet’s PEG is attractive at 0.9, which indicates that the stock is reasonably valued given the expected growth rate of 10.0%.

Based in George Town, the Cayman Islands and founded in 1999, Fabrinet provides advanced optical packaging and precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers (OEMs) of complex products such as optical communication components, modules and sub-systems, industrial lasers and sensors. Fabrinet also offers a broad range of advanced optical and electro-mechanical capabilities across the entire manufacturing process, including process design and engineering, supply chain management, manufacturing, advanced packaging, final assembly and test. Fabrinet has a market cap of $413.9 million.

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