Logitech (LOGI, Financial) has hired a chief design officer, upgraded many of its design organizations and earned 121 design awards last fiscal year which is highest in its history, including a Gold iF, 8 Good Design awards and 5 Red Dot awards. These awards certainly denote its progress and real success on a consumer purchase level and satisfaction with its products and should drive its growth in the long run.
Making the right moves financially
Also, it has reduced its operating expenses significantly. The reduction in operating expenses was the key driver of its improved profitability in the last quarter. The company incurred lowest operating expense in the fourth-quarter that was down by 500 basis points as compared to the same quarter a year earlier.
Also, its operating expenses have been reduced at 28.5% of sales, compared to 31.6% last year. Logitech is keen to execute these initiatives this fiscal year as well; that should help the company generate incremental savings and create robust investment capacity.
Besides, the company has built solid cash position, as it generated about $94 million in cash from the operations in the fourth quarter. It was the best quarter for the company in the last six years. The total cash flow from operation was $200 million last fiscal year 2014, which is for the first time 43% higher than its non-GAAP operating income of $140 million since 2010.
Another advantage with the company is that it has no debt outstanding so far; thus it can utilize these cash for further expansion or investment in the key business areas.
Fundamentals
Logitech has undeniably cheap valuation as it currently trades at the forward P/E of 12.95 as against the trailing P/E of 27.30, indicating robust growth for the company in the coming months. Its profit and operating margins look decent with yield of 3.56% and 4.54%, respectively. Also the return on equity remains strong with the ROE yield of 9.99%. Also the analysts have forecasted the CAGR of 26.00% for the next year, indicating potential growth for stock going forward and investors can certainly pick the stock to benefit more in the future from the stock.
