This valuation was done on the 2021-01-09
iRobot's biggest risk in my opinion is it's competitors. There are already quite a few such as Shark, Ecovacs, Roborock, Neato, iLife, and eufy. As autonomous vacuum cleaners become more popular (and they will) we can expect more competitors to enter this space as well potentially causing margins to be pushed down. Dyson, Bissell, Hoover, Samsung, LG and Panasonic are the traditional heavyweights and are also entering this space. Dyson especially has a history of innovation and could be a future threat.
While iRobot has lost 2% market share since 2016 the overall market is significantly bigger, especially for the upper end product mix:
This is great news for iRobot as their products have the most added value in the upper range of this mix with features such as:
Auto emptying into bins
Smart AI pathfinding
Efficient charging of it's robots
Deep clean capability
Considering the rapidly expanding autonomous vacuum market and now COVID-19 has accelerated this very rapidly due to more people spending time at home therefore they are spending more on household items.
The recent revenue growths of 40% in the last quarter are due to the full lockdowns people have had. I expect this to drop in the following years to 18% on average.
COVID-19 has had a big impact so far this quarter on margins due to the huge demand. This will level off though.
iRobot has a loyal product base and as they have shifted more towards the high end products I expect them to acheive margins of around 10% in year 10.
This is because the short term spike from covid should level off and the margins should go back to normal.
COVID-19 has stalled the companies plans to transition away from China to other parts of Asia, including Malaysia to 2021. This transitioning is happening due to the tarrifs between China & the U.S. This should cause a short term dip in sales to capital ratio in 2021 due to having to reinvest heavily to move it's operations out of China.
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in (millions), except per share amounts
I have estimated the shares to have a share price of - per share.
On the 9th Jan. 2021 they traded for - a share which gives a margin of safety of .
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