We?re all familiar now with the scenario from that startling Wednesday evening back in early February when iRobot’s stock (NASDAQ: IRBT) had just put up yeoman-like numbers, rising $1.44, or 4 percent, to close at $38.30 in regular-session trading. Nice going, until the company announced lower than expected guidance for 2012 of $0.75 to $0.95, missing the average analyst estimate of $1.39.
In the after-hours session, the elevator suddenly fell?precipitously! with iRobot’s shares plummeting downward by $8.07, or 21 percent, to $30.23 (52wk high and low: 22.46 and 39.00). Enter the long faces of doom and gloom merchants quickly spilling over into the media with dire forecasts. Uh-oh, what?s happened to the darling of Massachusetts robotics? But wait, even more startling, why now, a week later, are analysts suddenly so upbeat on iRobot?s future?
For one thing, iRobot has no debt. The company also has a Price-Earnings Ratio of 16 due to the 21 percent decrease in its stock price. This is much better than the P/E value the company had before the elevator sank, which was 28. As such, iRobot is enjoying the lowest P/E ratio in its history. In addition, the company has a gross margin of 40.45% compared with an industry average of 26.05%, an operating margin of 10.21% compared with an industry average of 8.85%, and net profit margin of 8.15% compared with an industry average of 3.19%. Hmmm, suddenly the company is looking a bit healthier than everyone was led to believe.
For another thing, iRobot, prior to its scary mid-winter?s descent, was already on a quick path to diversification. With wars winding down, military procurement sliding and 40 percent of its business locked into its government segment, iRobot saw the handwriting on the bows of troopships headed home. The maker of robots that vacuum and wash floors (as well as assist combat operations) was already headed into the big daddy of future robotics: healthcare. That entre came courtesy of a $6 million investment (January, 2012) for a minority stake in Santa Barbara, CA-based InTouch Health, a telemedicine company. InTouch has access to FDA regulated healthcare facilities, including hospitals, emergency care facilities, patient wards, operating and procedure rooms. Now, so too does its partner, iRobot.
The gambit, as iRobot?s CEO Colin Angle sees it is ?to develop potential healthcare applications on iRobot platforms?robots for remote healthcare and assistive technologies, especially for the elderly.? But it won?t happen right away, as Angle candidly admits that ?with our healthcare initiatives in 2012 we are not suggesting that we are going to see materiality in that initiative, but in 2013 and 2014 certainly that we become a real contributor.?
Of course, iRobot?s government (G&I) business isn?t going to disappear overnight or, for that matter, any time soon, but it certainly will diminish. The company?s CFO, John Leahy, ?expect?s roughly half of G&I product unit revenue to come from SUGV sales, 25% to come from PackBot and the balance to come from FirstLook and Warrior.?
Medical assistive robots from the iRobot/InTouch tandem?think Roomba-like machines with a periscope that follows heart-patient granny around her home?may soon become commonplace. Such devices will undoubtedly play a huge role in the new war?healthcare delivery. And the new theatre of operations are the 400 hospital locations on six continents enrolled in the InTouch Remote Presence network, delivering ?telemedicine services for patients in areas such as stroke, critical care, cardiology, trauma, pediatrics, neonatology, psychiatry, language translation, and clinical education and surgical/procedure mentoring.?
Looks like the iRobot elevator ride is on the way up again (but did it ever really, really go down?). Healthcare profitability may, as Angle admits, take a few years, but the rewards could well be staggering, especially for the sagacious few who bought shares of iRobot at a discount in February.Read More