Headquartered in Bedford, MA, iRobot Corporation (NASDAQ: IRBT) makes robots for use in the home, the exploration of space and military endeavors. Perhaps you have heard of the Roomba robot that vacuums home floors with the mere press of a button. This is iRobot’s most popular and profitable creation. Yet the company has produced dozens of other robots for myriad purposes.
There is little doubt this company will play an important role in making life easier and safer in the years to come. The question is whether iRobot’s stock is worth investing in.
iRobot’s Story
Take a look at the roots of iRobot, and you will be encouraged. The company was founded by a team of MIT grads who met while working in the school’s acclaimed Artificial Intelligence Lab. The MIT trio went on to develop home cleaning robots, military robots and even robots to ameliorate space exploration efforts.
The company won a DARPA research contract back in 1998. iRobot debuted the uber-successful Roomba home vacuum cleaner in 2002. The company was privately held until November of 2005. In 2012, iRobot purchased Evolution Robotics, the maker of the automated floor mopping machine known as “Mint”.
iRobot now employs over 500 people. The company has sold in excess of eight million robots meant for use in the home, and has supplied the defense industry and government with more than 5,000 security products.
iRobot by the Numbers
iRobot’s stock is currently priced at $83.54. The stock’s 52-week range is $34 to $104. The PE ratio is 42.95. iRobot’s 2016 revenue eclipsed $660 million. Operating income was $57 million. This represents a net income increase of nearly $42 million.
The company’s assets total $507 million, with a total equity is just under $390 million. The company has beaten the street’s earnings estimates in each of the past four quarters.
This is quite the rosy quantitative picture to say the least. In terms of recommendation ratings, the alleged experts have iRobot rated as a “Hold”. The average analyst price target is slightly above $77.
A Role in the Future
Ask any futurist about what lies ahead, and he will testify to the increased reliance on robotics. Robots will be used for everything from cleaning the house to nursing duties, military combat, the exploration of new planets and beyond. iRobot is gunning for a massive piece of this economic pie. T
he company’s PackBots are currently used to collect data in dangerous areas like the Fukushima nuclear disaster site in Japan, and are also used for military operations to dispose of bombs in Afghanistan, Iraq and beyond. Its Seaglider bot was used to pinpoint oil deep underwater following the Deepwater Horizon spill. However, iRobot pivoted away from the military sector to the consumer market in early 2016 when the company sold its military robotics unit to Arlington Capital Partners.
Critics of iRobot argue there is an abundance of competition in the consumer robotics market. Though it holds nearly 90 percent of the robotic vacuum market in the United States, the company has dragged its feet on pursuing legal action against competitors who allegedly copied the company’s technology. However, industry experts are in agreement that the home robotics space has massive untapped profit potential, especially compared to military robots.
The bottom line is that government budgets are wildly unpredictable. Consumers seem to always find discretionary income to spend on devices that make life easier, especially if such solutions free up time and eliminate manual labor.
The Roomba has been a spectacular success. However, investors are wondering what iRobot’s next hit product will be.
Braava, the company’s floor mopping bot, is quickly spilling into mainstream Asian markets. The device accounts for 40 percent of the company’s revenue in China, and a quarter of its revenue in Japan. These are double digit bounces in each market compared to a year ago. However, homes without hardwood floors do not require an automated floor mopper. This is an inherently limited market, yet iRobot could dominate it and rake in sizable profits for years to come.
iRobot shares are up an incredible 150 percent across the past year. Wait for the stock to cool off before investing. Though iRobot might provide a nice return across the long haul, it is a risky short-to-mid-term play.
Regards,
Ethan Warrick
Editor
Wealth Authority
