📡 Four under-the-radar linear compounders

Let's take a quick look at four companies that have compounded their share price with a high level of linearity and also have a fairly decent underlying business. For each company, we will take a brief look at the business, growth, capital efficiency, valuation and share price momentum. While the below companies are all US-based, they are either small-cap (S&P 600) or mid-cap (S&P 400), and therefore are likely to be under-the-radar of most analysts and uninvestable for the large AUM hedge funds.

Number 1: Fabrinet (NYSE:FN)

• Business: Fabrinet sells precision optical technology. Their lasers are used in semiconductor processing. They have a market capitalisation of $7bn.
• Growth: Over the last 5 years, Fabrinet's revenue has grown 13% per year and FCF per share has grown 24% per year. SBC is 8% of operating cash flow.
• Capital efficiency: The cash return on capital is currently 21%. CAPEX is currently 15% of operating cash flow. Interest expense is 0% of operating profit. Over the last 5 years, buybacks have reduced the number of shares by 2%.
• Valuation: The FCF yield is currently 4.16%.
• Price: Share price has compounded 28.7% per annum over the last 10 years with a linearity of 0.91. Shares are currently down 24% from their most recent high.