Fabrinet (FN)

Short-term

Turnover ratios

The activity ratios of Fabrinet indicate several noteworthy trends over the analyzed period.

Inventory Turnover:
The inventory turnover ratio exhibits a general upward trend from 4.39 times as of September 30, 2020, reaching a peak of 5.97 times on September 30, 2024. This increase suggests improved inventory management efficiency, with less capital tied up in inventory relative to sales. The ratio's fluctuations initially reflect some variability; however, the sustained upward trend in recent periods indicates a consistent effort to optimize inventory levels, possibly aligned with operational efficiencies or shifts in supply chain management.

Receivables Turnover:
Receivables turnover ratios display relative stability throughout the period, oscillating between approximately 4.53 and 5.52 times. Notably, the ratio peaks at 5.52 times on September 30, 2021, and again reaches 5.00 times in September 2023. The gradual decline and subsequent stabilization imply that the company's collection efficiency has remained relatively stable, although slight fluctuations could be linked to changes in credit policies or collection processes. Overall, a higher receivables turnover signifies effective credit management and rapid collection of receivables.

Payables Turnover:
The payables turnover ratio shows an overall increasing trend, reaching 6.55 times on September 30, 2023—the highest within the observed timeframe—before slightly declining to 6.32 times at the end of 2023. This trend indicates that Fabrinet is paying its suppliers more frequently in recent periods, possibly reflecting improved liquidity or negotiated terms favoring more prompt payments. The ratio’s fluctuations, especially the notable rise after 2022, may suggest an emphasis on strengthening supplier relationships or managing working capital more aggressively.

Working Capital Turnover:
The working capital turnover ratio demonstrates a stable but slightly declining pattern over the period, fluctuating between approximately 1.96 and 2.32. The ratio remains relatively constant around 2.0, with a modest decline from the beginning of the period until late 2023, followed by a slight uptick in 2024-2025. The stability indicates consistent utilization of working capital relative to sales, with minor variations possibly attributable to operational adjustments or shifts in sales volume relative to working capital holdings.

In summary, Fabrinet's activity ratios suggest ongoing efforts to optimize operational efficiency. The rising inventory turnover ratio indicates improved inventory management, while stable receivables and payables turnover ratios reflect maintained effectiveness in receivables collection and supplier payment practices. The stable working capital turnover signals consistent utilization of working capital resources aligned with sales activity. Overall, these ratios portray a company likely focused on enhancing operational efficiency and working capital management over the analyzed period.

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Average number of days

The analysis of Fabrinet’s activity ratios over the specified periods reveals notable trends and insights into the company's operational efficiency and working capital management.

Days of Inventory on Hand (DOH):
Fabrinet's inventory holding period exhibited fluctuation from September 2020 to June 2024. Initially, the DOH increased from approximately 83.2 days in September 2020 to a peak of 102.46 days in June 2022. This rise suggests a period of increasing inventory levels, potentially due to strategic stockpiling, shifts in supply chain management, or inventory buildup during uncertain market conditions. Subsequently, from September 2022 onward, a consistent downward trend emerges, dropping to 61.10 days by September 2024. The decline indicates improved inventory turnover, reflecting enhanced inventory management, quicker product cycle, or streamlined supply chain processes. The expected continuation of this trend beyond 2024 points toward ongoing efficiency improvements.

Days of Sales Outstanding (DSO):
Fabrinet’s receivables collection period demonstrated relative stability with minor fluctuations. Beginning at approximately 70.7 days in September 2020, the DSO experienced a slight increase to around 78.7 days by March 2022. Following this peak, the DSO stabilized around 73-79 days, with no drastic variation, suggesting consistent credit and collection policies. As of September 2024, the DSO stands near 80.6 days, indicating that the company maintains a relatively steady collection period. This stability reflects stable customer credit practices and consistent cash flow management, although the slight upward trend in recent periods indicates a potential area for further efficiency improvements in receivables collection.

Number of Days of Payables:
Fabrinet’s payable period experienced fluctuations but generally trended downward from September 2020 to September 2023. The number of days payable decreased from approximately 69.7 days in September 2020 to a low of 55.8 days in September 2023. This reduction implies that the company has been paying its suppliers more promptly, possibly due to improved cash flow positions, negotiated better payment terms, or strategic management to strengthen supplier relationships. However, from December 2023 to June 2025, the payable days increased again, reaching approximately 77.4 days, indicating a potential shift toward lengthening payment cycles, possibly to preserve cash or adapt to changes in supplier agreements.

Overall Implications:
The period from 2020 to 2024 demonstrates Fabrinet’s efforts to optimize its working capital. The significant reduction in inventory days suggests improved operational efficiency and inventory turnover. The relatively stable DSO indicates consistent receivables management, while the fluctuating but generally decreasing payable days reflect active management of supplier payments. The recent extension in payable days might suggest a strategic shift to improve liquidity or adapt to supplier negotiations. Continual monitoring of these ratios can provide insights into Fabrinet’s operational adjustments and financial health moving forward.

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Long-term

Fabrinet's long-term activity ratios, specifically the fixed asset turnover and total asset turnover ratios, exhibit notable trends over the analyzed periods. The fixed asset turnover ratio demonstrates a gradual upward trajectory, increasing from approximately 7.38 times as of September 30, 2020, to a peak of about 8.56 times by September 30, 2023. This steady enhancement indicates that the company has become increasingly efficient in utilizing its fixed assets to generate sales revenue. The rising trend suggests ongoing improvements in asset management or possibly an optimized deployment of fixed assets, contributing positively to operational efficiency.

Similarly, the total asset turnover ratio shows a consistent upward movement, from around 1.18 in September 2020 to approximately 1.32 in September 2023. This trend signifies a consistent improvement in the overall efficiency with which Fabrinet employs its total assets to produce sales. The ratios maintain a relatively stable pattern, with slight fluctuations, but the overall upward trend persisted, suggesting effective asset utilization at the broader level.

The continuous climb in both the fixed asset and total asset turnover ratios over the analyzed periods reflect a strengthening in operational efficiency and asset management. These improvements could be associated with increased productivity, optimized capital allocation, or technological advancements. However, the ratios stabilize and even slightly decline slightly towards the end of the period, highlighting a potential plateauing of efficiency gains or the need for further strategic enhancements.

Overall, Fabrinet's long-term activity ratios suggest an encouraging trend of improving asset utilization efficiency, which positively aligns with potential growth and operational effectiveness. This sustained performance indicates robust management of resources and promising prospects for continued efficiency improvements in subsequent periods.