In this article, let's take a look at BlackBerry Limited (BBRY, Financial), a $5.48 billion market cap company, that designs, manufactures, and markets wireless solutions worldwide.
New Deal
Billy Ho, Executive Vice President, Enterprise Products and Value Added Solutions of BlackBerry says the company "is working with Google to provide customers with solutions they can confidently deploy on all major mobile platforms within their organization,"
The stock was up 2.3% to $10.51 yesterday, due to the announcement of a partnership with Google Inc. (GOOG, Financial). The deal is expected to provide technology that can separate an employee’s personal and work data on a smartphone.
Mr. Ho continues, "Android for Work with BES12 will provide customers with another option to enhance their mobile security and the productivity of their employees, and the peace of mind that they will not have to relinquish any control over corporate data, sacrifice user experience or introduce more complexity into their environments."
Revenues and EPS
Looking at profitability, revenues declined by 33.53%, but earnings per share increased in the most recent quarter compared to the same quarter a year ago (-$0.28 vs -$8.37). During the past fiscal year, the company reported poor results: Ă‚ -$11.17 versus -$1.20. This year, Wall Street expects an improvement in earnings (-$0.15 versus -$11.17).
Margins
The gross profit margin is considered high at 63.81% and has increased from the same quarter the previous year.However, net profit margin is ranked lower than 56% of the 702 Companies in the Communication Equipment industry.
Profitability
Let´s compare the best measure of performance for a firm's management: the return on equity. The ROE is useful for comparing the profitability of a company to that of other firms in the same industry.
| Ticker | Company | ROE (%) |
| BBRY | BlackBerry | -26.83 |
| CAJ | Canon | 8.83 |
| LXK | Lexmark | 5.87 |
| STX | Seagate Technology | 69.36 |
| Ă‚ | Industry Median | 5.05 |
The company currently has a ROE of 26.83%, which is lower than the industry median and both Canon (CAJ) and Lexmark (LXK). In general, analysts consider ROE ratios in the 15-20% range as representing attractive levels for investment. For investors looking for those levels or more, Seagate (STX) could be an option. It is very important to understand this metric before investing and it is important to look at the trend in ROE over time.
Relative Valuation
In terms of valuation, the stock sells at a forward P/E of 625x.
This ratio is a valuation method used to compare a company's current share price to its expected per-share earnings. It is the price divided by a Wall Street estimate of EPS for the coming year.
To use another metric, its price-to-book ratio of 1.81x indicates a discount versus the industry average of 2.40x while the price-to-sales ratio of 1.8x is above the industry average of 1.66x.
As we can see in the next chart, the stock price has a downward trend in the five-year period.
Final Comment
Although the company has a negative ROE, we can see strengths on earning´s growth, good new ideas and increase in stock price during the past year. This analysis make me feel bullish on this stock.
Hedge fund guru like Jeremy Grantham (Trades, Portfolio), the Chairman of Boston-based Board of Grantham Mayo Van Otterloo, has divested in the stock in the last quarter of 2014.
Disclosure: Omar Venerio holds no position in any stocks mentioned
