Intrinsic value of iRobot Corporation - IRBT

Previous Close

$98.87

  Intrinsic Value

$70.73

stock screener

  Rating & Target

sell

-28%

Previous close

$98.87

 
Intrinsic value

$70.73

 
Up/down potential

-28%

 
Rating

sell

We calculate the intrinsic value of IRBT stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 2.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  17.70
  16.43
  15.29
  14.26
  13.33
  12.50
  11.75
  11.07
  10.47
  9.92
  9.43
  8.99
  8.59
  8.23
  7.91
  7.61
  7.35
  7.12
  6.91
  6.72
  6.54
  6.39
  6.25
  6.13
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
Revenue, $m
  1,286
  1,498
  1,727
  1,973
  2,236
  2,516
  2,811
  3,122
  3,449
  3,791
  4,149
  4,522
  4,910
  5,314
  5,734
  6,171
  6,624
  7,096
  7,586
  8,095
  8,625
  9,176
  9,750
  10,347
  10,969
  11,618
  12,294
  13,000
  13,736
  14,505
Variable operating expenses, $m
  1,080
  1,256
  1,447
  1,653
  1,872
  2,106
  2,352
  2,612
  2,885
  3,171
  3,463
  3,775
  4,099
  4,436
  4,787
  5,151
  5,530
  5,924
  6,333
  6,758
  7,200
  7,660
  8,139
  8,638
  9,157
  9,698
  10,263
  10,852
  11,467
  12,108
Fixed operating expenses, $m
  73
  74
  76
  77
  79
  81
  83
  85
  86
  88
  90
  92
  94
  96
  98
  101
  103
  105
  107
  110
  112
  115
  117
  120
  122
  125
  128
  131
  133
  136
Total operating expenses, $m
  1,153
  1,330
  1,523
  1,730
  1,951
  2,187
  2,435
  2,697
  2,971
  3,259
  3,553
  3,867
  4,193
  4,532
  4,885
  5,252
  5,633
  6,029
  6,440
  6,868
  7,312
  7,775
  8,256
  8,758
  9,279
  9,823
  10,391
  10,983
  11,600
  12,244
Operating income, $m
  134
  168
  204
  243
  285
  329
  376
  426
  478
  532
  595
  655
  717
  782
  849
  919
  992
  1,067
  1,146
  1,228
  1,313
  1,401
  1,494
  1,590
  1,690
  1,794
  1,903
  2,017
  2,136
  2,260
EBITDA, $m
  167
  205
  246
  290
  337
  387
  440
  497
  556
  617
  682
  749
  820
  893
  969
  1,048
  1,130
  1,216
  1,304
  1,397
  1,493
  1,593
  1,697
  1,806
  1,919
  2,037
  2,160
  2,289
  2,423
  2,563
Interest expense (income), $m
  0
  0
  2
  5
  7
  10
  13
  16
  20
  23
  27
  31
  35
  39
  44
  48
  53
  58
  63
  69
  74
  80
  86
  93
  99
  106
  113
  120
  128
  136
  145
Earnings before tax, $m
  134
  165
  199
  236
  274
  316
  360
  406
  455
  505
  564
  620
  678
  738
  801
  866
  934
  1,004
  1,077
  1,153
  1,233
  1,315
  1,401
  1,491
  1,584
  1,681
  1,783
  1,889
  2,000
  2,115
Tax expense, $m
  36
  45
  54
  64
  74
  85
  97
  110
  123
  136
  152
  167
  183
  199
  216
  234
  252
  271
  291
  311
  333
  355
  378
  402
  428
  454
  481
  510
  540
  571
Net income, $m
  98
  121
  145
  172
  200
  231
  263
  296
  332
  369
  412
  453
  495
  539
  584
  632
  681
  733
  786
  842
  900
  960
  1,023
  1,088
  1,156
  1,227
  1,302
  1,379
  1,460
  1,544

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  903
  1,051
  1,212
  1,385
  1,569
  1,765
  1,973
  2,191
  2,421
  2,661
  2,911
  3,173
  3,446
  3,729
  4,024
  4,330
  4,649
  4,980
  5,324
  5,681
  6,053
  6,440
  6,842
  7,261
  7,698
  8,153
  8,627
  9,122
  9,639
  10,179
Adjusted assets (=assets-cash), $m
  903
  1,051
  1,212
  1,385
  1,569
  1,765
  1,973
  2,191
  2,421
  2,661
  2,911
  3,173
  3,446
  3,729
  4,024
  4,330
  4,649
  4,980
  5,324
  5,681
  6,053
  6,440
  6,842
  7,261
  7,698
  8,153
  8,627
  9,122
  9,639
  10,179
Revenue / Adjusted assets
  1.424
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
  1.425
Average production assets, $m
  151
  175
  202
  231
  262
  294
  329
  365
  404
  444
  485
  529
  574
  622
  671
  722
  775
  830
  888
  947
  1,009
  1,074
  1,141
  1,211
  1,283
  1,359
  1,438
  1,521
  1,607
  1,697
Working capital, $m
  163
  190
  219
  251
  284
  319
  357
  397
  438
  482
  527
  574
  624
  675
  728
  784
  841
  901
  963
  1,028
  1,095
  1,165
  1,238
  1,314
  1,393
  1,475
  1,561
  1,651
  1,744
  1,842
Total debt, $m
  41
  86
  134
  187
  242
  301
  364
  430
  499
  572
  648
  727
  809
  895
  984
  1,076
  1,172
  1,272
  1,376
  1,484
  1,596
  1,713
  1,835
  1,961
  2,093
  2,231
  2,374
  2,523
  2,679
  2,842
Total liabilities, $m
  273
  317
  366
  418
  474
  533
  596
  662
  731
  804
  879
  958
  1,041
  1,126
  1,215
  1,308
  1,404
  1,504
  1,608
  1,716
  1,828
  1,945
  2,066
  2,193
  2,325
  2,462
  2,605
  2,755
  2,911
  3,074
Total equity, $m
  630
  734
  846
  966
  1,095
  1,232
  1,377
  1,529
  1,690
  1,857
  2,032
  2,215
  2,405
  2,603
  2,809
  3,023
  3,245
  3,476
  3,716
  3,965
  4,225
  4,495
  4,776
  5,068
  5,373
  5,691
  6,022
  6,367
  6,728
  7,105
Total liabilities and equity, $m
  903
  1,051
  1,212
  1,384
  1,569
  1,765
  1,973
  2,191
  2,421
  2,661
  2,911
  3,173
  3,446
  3,729
  4,024
  4,331
  4,649
  4,980
  5,324
  5,681
  6,053
  6,440
  6,842
  7,261
  7,698
  8,153
  8,627
  9,122
  9,639
  10,179
Debt-to-equity ratio
  0.070
  0.120
  0.160
  0.190
  0.220
  0.240
  0.260
  0.280
  0.300
  0.310
  0.320
  0.330
  0.340
  0.340
  0.350
  0.360
  0.360
  0.370
  0.370
  0.370
  0.380
  0.380
  0.380
  0.390
  0.390
  0.390
  0.390
  0.400
  0.400
  0.400
Adjusted equity ratio
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698
  0.698

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  98
  121
  145
  172
  200
  231
  263
  296
  332
  369
  412
  453
  495
  539
  584
  632
  681
  733
  786
  842
  900
  960
  1,023
  1,088
  1,156
  1,227
  1,302
  1,379
  1,460
  1,544
Depreciation, amort., depletion, $m
  33
  37
  42
  47
  52
  58
  64
  71
  78
  85
  87
  94
  103
  111
  120
  129
  138
  148
  158
  169
  180
  192
  204
  216
  229
  243
  257
  272
  287
  303
Funds from operations, $m
  131
  158
  187
  219
  253
  289
  327
  367
  410
  454
  499
  547
  597
  650
  704
  761
  820
  881
  945
  1,011
  1,080
  1,152
  1,227
  1,304
  1,386
  1,470
  1,558
  1,651
  1,747
  1,847
Change in working capital, $m
  25
  27
  29
  31
  33
  35
  38
  40
  42
  43
  45
  47
  49
  51
  53
  55
  58
  60
  62
  65
  67
  70
  73
  76
  79
  82
  86
  90
  94
  98
Cash from operations, $m
  106
  131
  158
  188
  219
  253
  290
  328
  368
  410
  453
  500
  548
  598
  651
  706
  762
  821
  883
  946
  1,013
  1,082
  1,154
  1,229
  1,307
  1,388
  1,473
  1,561
  1,653
  1,750
Maintenance CAPEX, $m
  -23
  -27
  -31
  -36
  -41
  -47
  -53
  -59
  -65
  -72
  -79
  -87
  -94
  -103
  -111
  -120
  -129
  -138
  -148
  -158
  -169
  -180
  -192
  -204
  -216
  -229
  -243
  -257
  -272
  -287
New CAPEX, $m
  -22
  -25
  -27
  -29
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -64
  -67
  -70
  -73
  -76
  -79
  -83
  -86
  -90
Cash from investing activities, $m
  -45
  -52
  -58
  -65
  -72
  -80
  -88
  -95
  -103
  -112
  -121
  -131
  -139
  -150
  -160
  -171
  -182
  -193
  -205
  -218
  -231
  -244
  -259
  -274
  -289
  -305
  -322
  -340
  -358
  -377
Free cash flow, $m
  61
  79
  100
  123
  147
  174
  202
  233
  265
  298
  332
  369
  408
  449
  491
  535
  580
  628
  677
  728
  782
  837
  895
  955
  1,018
  1,083
  1,151
  1,222
  1,295
  1,373
Issuance/(repayment) of debt, $m
  41
  45
  49
  52
  56
  59
  63
  66
  69
  73
  76
  79
  82
  86
  89
  93
  96
  100
  104
  108
  112
  117
  122
  127
  132
  137
  143
  150
  156
  163
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  41
  45
  49
  52
  56
  59
  63
  66
  69
  73
  76
  79
  82
  86
  89
  93
  96
  100
  104
  108
  112
  117
  122
  127
  132
  137
  143
  150
  156
  163
Total cash flow (excl. dividends), $m
  102
  124
  149
  175
  203
  233
  265
  299
  334
  371
  408
  448
  490
  534
  580
  627
  676
  728
  781
  836
  894
  954
  1,016
  1,082
  1,149
  1,220
  1,294
  1,371
  1,452
  1,536
Retained Cash Flow (-), $m
  -95
  -104
  -112
  -121
  -129
  -137
  -145
  -152
  -160
  -168
  -175
  -183
  -190
  -198
  -206
  -214
  -222
  -231
  -240
  -250
  -259
  -270
  -281
  -293
  -305
  -318
  -331
  -346
  -361
  -377
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  7
  21
  36
  54
  74
  96
  120
  146
  174
  203
  233
  266
  300
  336
  374
  413
  454
  497
  541
  587
  634
  684
  736
  789
  845
  903
  963
  1,025
  1,091
  1,159
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  7
  19
  32
  45
  58
  70
  81
  91
  100
  107
  111
  113
  114
  113
  110
  105
  99
  91
  83
  75
  66
  57
  48
  40
  33
  26
  21
  16
  12
  9
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

iRobot Corporation is a consumer robot company, which is engaged in designing and building robots. The Company's portfolio of solutions features various technologies for the connected home and various concepts in mapping, navigation, mobility and artificial intelligence. The Company sells various products that are designed for use at home. Its consumer products focus on both indoor and outdoor cleaning applications. The Company offers multiple Roomba floor vacuuming robots. Roomba's design allows it to clean under kick boards, beds and other furniture. It offers the Braava family of automatic floor mopping robots designed for hard surface floors. The Roomba 600 series robots offer a three-stage cleaning system. The iRobot HOME Application helps users to choose cleaning options for their home. Its Mirra Pool Cleaning Robot is used to clean residential pools. The Company's trademarks include Scooba, ViPR, NorthStar, Create, iAdapt, Aware, Home Base, Looj, Braava, vSLAM and Virtual Wall.

FINANCIAL RATIOS  of  iRobot Corporation (IRBT)

Valuation Ratios
P/E Ratio 64.1
Price to Sales 4.1
Price to Book 6.9
Price to Tangible Book
Price to Cash Flow 23.2
Price to Free Cash Flow 25.6
Growth Rates
Sales Growth Rate 7.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 22.2%
Cap. Spend. - 3 Yr. Gr. Rate 9.5%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 8.2%
Ret/ On Assets - 3 Yr. Avg. 8.4%
Return On Total Capital 10.4%
Ret/ On T. Cap. - 3 Yr. Avg. 10.6%
Return On Equity 10.4%
Return On Equity - 3 Yr. Avg. 10.6%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 48.3%
Gross Margin - 3 Yr. Avg. 47.1%
EBITDA Margin 11.3%
EBITDA Margin - 3 Yr. Avg. 11.9%
Operating Margin 8.8%
Oper. Margin - 3 Yr. Avg. 9.4%
Pre-Tax Margin 9.2%
Pre-Tax Margin - 3 Yr. Avg. 9.6%
Net Profit Margin 6.4%
Net Profit Margin - 3 Yr. Avg. 6.8%
Effective Tax Rate 31.1%
Eff/ Tax Rate - 3 Yr. Avg. 29.4%
Payout Ratio 0%

IRBT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IRBT stock intrinsic value calculation we used $1093 million for the last fiscal year's total revenue generated by iRobot Corporation. The default revenue input number comes from 0001 income statement of iRobot Corporation. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our IRBT stock valuation model: a) initial revenue growth rate of 17.7% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for IRBT is calculated based on our internal credit rating of iRobot Corporation, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of iRobot Corporation.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of IRBT stock the variable cost ratio is equal to 84%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $71 million in the base year in the intrinsic value calculation for IRBT stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for iRobot Corporation.

Corporate tax rate of 27% is the nominal tax rate for iRobot Corporation. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the IRBT stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for IRBT are equal to 11.7%.

Life of production assets of 5.6 years is the average useful life of capital assets used in iRobot Corporation operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for IRBT is equal to 12.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $535.322 million for iRobot Corporation - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 27.825 million for iRobot Corporation is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of iRobot Corporation at the current share price and the inputted number of shares is $2.8 billion.

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