It’s time to buy some IRobot stock. Let’s go through some quick analysis–
The shares trade at 20x earnings. Certainly not terribly cheap from a historical valuations standpoint, but relatively cheap in this low interest rate market.
The company, maker of the Roomba, will continue to be hurt by Chinese tariffs. That’s part of the reason shares have plunged- from as high as $132.88, after revising down earnings estimates, largely based on the trade war, rather than demand or the quality of the product.
One has to assume that the trade war will be long lasting for this to have such a large affect on share price, and it is my belief that the ever craving ego of The Donald, will craft a deal with China to spruce his re-election bid by summer 2020.
A new driver of revenue- robotic lawnmowers will also be out soon.
IRobot lawnmower due out soon
I myself am a fan of their products, owning a Roomba myself as well as purchasing one for my Mom. They offer great time savings and ease of mind. The brand has strong recognition as companies like Samsung come in with similar products.
The company is on the smaller size (something like a 2B valuation. That makes it a lucrative takeover target, especially as the valuation is not that rich. I am really surprised Google, Amazon, or Apple hasn’t purchased it already. I wrote a column years ago wondering whether Google would buy it. 6 months later they bought Boston Dynamics. Shopify just purchased a robotics company founded by former Amazon Robotics employees for 450M, buying this company with a strong brand and technology must
The company has Zero long term debt.
It also has 130M in cash, which means that worst case scenario you lose something like 95.5% of your investment, not 100%. This isn’t an Apple war chest or percentage of market cap in cash, but it is something. Here is a link to the company’s balance sheet.
I also watched the CEO, Colin Angle on an Artificial Intelligence podcast with Lex Friedman. He’s the founder of the company and still there. Seems a little nerdy, but a good guy. Big difference when you have a founder still running the corporation in terms of wanting the best for his baby versus his own pocket.
Overall, the company’s shares seem to have more upside than downside as they today a $59 a share.