I just went through $IRBT and I wanted to share with you my findings, any comments, thoughts and critiques are deeply appreciated. The company is growing: ROIC is high (46%), 10y EPS (23.4%), BV (14%), FCF (6%) and Revenue (12.6%) all improving . A quick ten cap valuation (owner earnings per share are 9.05 estimated) suggests a modestly undervalued price so I ran a FCFE valuation (Damodaran based spreadsheet) and I have estimated a fair value of 134$ (43% Margin of safety). Financial conditions are good: no debt, good cash and profit margin higher than 5%. Personally I think they have a moat to rely on: their products are known and they are leader in a market niche like robotic vacuums (estimated market share is 54%). The management is experienced and they decided to enter also in the education sector with a programmable robot. This move in my opinion, will have a positive footprint on next generations and will generate positive returns in brand image for iRobot. They also act like a Venture Capital firm as they provide funds to startups in the tech sector and eventually they have a return on those investments, both in intellectual property and on a financial point of view. They have invested in firms alongside Amazon for eg. in the startup “labrador”. Biggest short term threat are tariffs, as they import their manufactured products from China. Until Dec. the gvnmt has decided to suspend duties for them but next year with the new administration nobody already knows if they will be charged or not (personally I think not but if anybody wants to share their thoughts is deeply appreciated). I think it is a short term threat that is affecting the price of the stock, though it could be a good opportunity to go long at this levels for the long run. Also the current situation with the “stay-at-home”, can have a big impact on the company’s sales as people start to care more about their houses and the cleaning.
TL;DR: $IRBT analysis:
-Positive growth in the last 10 years;
-43% undervalued based on FCFE valuation;
-Outstanding financial conditions: no debt, good margins;
-Moat: wide as they are leader in a market niche;
-Management: experienced and took good decisions that can improve brand image;
-Short term threat: tariffs;
-Market conditions: people understand that taking care of their home is important, it is a possible opportunity for the company.
Disclosure: I have no position in $IRBT this is only a personal view and I just wanted to share with you my findings. I’m looking for any suggestions and comments, these are deeply appreciated
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.