IBuy Droids- IRobot
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A few weeks ago, I wrote a column predicting that robots would be the new .com wave of investing, and we would see big run-ups in share prices as they become ubiquitous in our everyday lives, making us more efficient, and giving us more free time.
The self-driving car running on Google (NASDAQ: GOOG) software for example, is already being tested on roads in Nevada (where the worst that will happen is you’ll run into a cactus) and who knows how long til it’s ready for Primetime, but the fact is that robots and humans will soon be co-existing on this planet to a much greater degree than they do today.
That being said, let’s take a look at a company that many of you have some sort of experience with, IRobot (NASDAQ: IRBT). They’re the ones that make the Roomba, the robotic vacuum cleaners that clean your house with a push of a button. The Roomba line is actually ten years old, but still has a low market penetration in the United States, where only an estimated 8% of vacuums sold are of the robotic variety, which compares to up to 25% in Spain, where people are either smarter or lazier- most likely a combination.
The company has announced a 10 million dollar advertising blitz, banners, print, and commercials targeting the more affluent, that I believe will see very good results. I say this from personal experience, as I recently purchased a Roomba for my Mom. My vague idea of the product’s existence instantly sharpened after reading a single article about them. The time is ripe for this product to enter America’s consciousness, as well houses, on a mass scale. (do we really want to be that far behind the Spanish?)
The company also has other product lines, including a kitchen cleaning mop-up robot named Ava, medical robots that designed to assist physicians, a sea faring robot used in oil exploration amongst other purposes called the Sea Glider, as well as their military robots including those that are sent out to inspect possible IED’s (featured in Oscar winning movie- “The Hurt Locker”) and their Warrior Robot.
Though recent quarterly results don’t look all that wonderful from afar- revenue of $97.8 million, down 8% from first quarter results a year ago at $106.3 million, net income was reported to be down 91% at $0.7 million from $7.5 million as of first quarter 2011.
What’s with the drop? Simple- the military cut back on their purchases of the higher prices Warrior Robot due to budgetary cuts, worrying some investors that the plug might be pulled on military robotics all together, with the looming budget confrontations in Congress.
I’m here to tell you, such fears are utterly unfounded and nonsensical. The fact is no matter how much something costs, be it a robot, a tractor, a jet airplane, I don’t care if it’s millions of dollars, if you get a return on investment (ROI) on the money spent, the item will be purchased.
IRobots save our soldiers’ lives. Not to be a cold, hard accountant, but how much money does each life spared by these technologies save the taxpayer and the government?
A Hoover vacuum cleaner is let’s say a couple hundred dollars cheaper than a new Roomba. If I value the time I would save by giving the robot free reign over the house more than I do the $200, it’s worthy of the investment.
As long as IRobot generates a positive ROI, investors have nothing to fear about demand, even if it temporarily slows down with the ebbs of the economy.
Additionally, the stock is trading well below the company’s IPO price from 6 years ago, has zero debt, has built up $6.66 cash per share, and positive cash flow each quarter. It's a small cap stock, below the radar of many large cap funds, and based on what I see as a bright future, is valued cheaply at 18 x earnings, not to mention all their patents.
IBuy IRobot. Hell, wouldn’t Apple buy them out just for the name?
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funspirit is long GOOG and IRBT. The Motley Fool owns shares of Google. Motley Fool newsletter services recommend Google and iRobot . Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.