Two Sub-$1 Billion Companies With No Debt and Plenty of Upside Potential


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Control4 and iRobot can add respectable growth at reasonable valuations to an investor's portfolio.

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Two Sub-$1 Billion Companies With No Debt and Plenty of Upside Potential

  1. 1. Control4 and iRobot Two stocks that may satisfy the growth needed in your portfolio. Source: iRobotSource: iRobot
  2. 2. What is iRobot? • Many consumers are likely most familiar with iRobot in the form of its Roomba vacuum lineup. • But many don’t realize that it has other household robots that mop floors, clean pools and clear gutters. • “iRobot Corporation designs, develops, and markets robots for consumer, defense and security, telemedicine, and video collaboration markets worldwide,” (according to Yahoo! Finance company description). Source: iRobot
  3. 3. What is Control4? • From SEC filing: “Control4 Corporation provides automation and control solutions for the connected home” • Control4 “functions as the operating system of the home, integrating music, video, lighting, temperature, security, communications, and other devices in the home automation market,” (according to Yahoo! Finance company description). • So far, market penetration for home automation is in its infancy for all companies in this relatively new market. Thus, it has plenty of opportunity and runway ahead.
  4. 4. Debt and Cash • While Control4 does have $1.83 million in long-term (LT) debt, iRobot has zero LT debt. • Both Control4 (CTRL) and iRobot (IRBT) have plenty of cash and short-term investments on the balance sheet, with $84.5 million and $153 million, respectively. $153 $85 $0.0 $1.8 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 IRBT CTRL Dollars(inmillions) Cash Debt
  5. 5. Earnings Growth • Analysts expect CTRL to grow EPS by 21% in 2014 and a whopping 61% in 2015. • iRobot experienced a sharp drop in defense and security orders from 2011 to 2012, hurting the bottom-line. It has since returned to double digit EPS growth. • Analysts expect IRBT to grow EPS 18% in 2014 and 28% in 2015. 0 5 10 15 20 25 30 35 40 45 50 55 60 65 2013 2014* 2015* EPSGrowth(%) Fiscal Year (* = estimate) CTRL IRBT
  6. 6. Earnings Per Share 0 0.16 0.32 0.48 0.64 0.8 0.96 1.12 1.28 1.44 1.6 2013 2014* 2015* EarningsPerShare Fiscal Year (* = estimate) CTRL IRBT• In the previous slide we detailed earnings per share growth. • Here is a look at each company’s actual earnings per share and estimates for 2014 and 2015.
  7. 7. Revenue Growth • Control4 has grown revenues by double digit percentages since 2010, and is expected to do so in 2014 and 2015 as well. • Year-over-year revenue fell in 2012, due to a fall in D&S sales, but IRBT has grown revs by double digits each year since. 5 7 8 10 11 13 14 16 17 19 20 2013 2014* 2015* RevenueGrowth(%) Fiscal Year (* = estimate) CTRL IRBT
  8. 8. Actual Revenue • In the previous slide we detailed revenue growth. • Here is a look at each company’s actual revenues and estimates for 2014 and 2015. 0 50 100 150 200 250 300 350 400 450 500 550 600 650 2013 2014* 2015* Revenues(inMillions) Fiscal Year (* = estimate) CTRL IRBT
  9. 9. Revenues and Earnings • You cannot compare the actual earnings and actual revenues between the two companies because iRobot is much bigger than Control4. • That’s why it’s important to keep in mind the growth of each company’s earnings per share and revenue. • For that reason, I included the growth figures for each company, and will now take a look at valuation.
  10. 10. Valuation — IRBT • iRobot has reasonable valuation metrics when compared to its expected growth. At 25 times 2015 earnings estimates, the stock looks cheap as analysts expect EPS to grow 28%. • The company has a 5-year PEG ratio of 0.97 according to Yahoo! Finance — a measurement indicating a potentially undervalued asset. • (More about the PEG ratio can be read here, while a more in-depth analysis of iRobot’s valuation can be read in, What’s iRobot’s Stock Really Worth?).
  11. 11. Valuation — CTRL • A forward PE ratio of 24.5 is reasonable, considering analyst expect 2015 earnings to grow a whopping 60% from 2014’s earnings. • CTRL’s 3-year PEG ratio comes in at 0.72 — another measurement indicating a potentially undervalued asset. • A 3-year PEG ratio was used because I believe the estimates are more accurate than 5-year estimates, the latter of which is 1.85 according to Yahoo! Finance. (Note: A 3-year PEG was not available for IRBT). • It seems likely that CTRL will be able to grow faster than the five-year PEG ratio would suggest, given that its three-year PEG is much lower.
  12. 12. CTRL and IRBT in Review • By examining several metrics for iRobot and Control4, we have concluded that shares are reasonably priced in the low-$30s and mid-teens, respectively. Our highlight for both companies includes: • Little to no debt, with plenty of cash • Accelerated earnings and revenue growth • Reasonable valuations given the growth of EPS and revenues
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