Is Sierra Wireless, Inc. Destined for Greatness?

Let's see what the numbers say about Sierra Wireless (SWIR).

Jun 24, 2014 at 12:00PM

Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does Sierra Wireless (NASDAQ:SWIR) fit the bill? Let's take a look at what its recent results tell us about its potential for future gains.

What we're looking for
The graphs you're about to see tell Sierra Wireless' story, and we'll be grading the quality of that story in several ways:

  • Growth: Are profits, margins, and free cash flow all increasing?
  • Valuation: Is share price growing in line with earnings per share?
  • Opportunities: Is return on equity increasing while debt to equity declines?
  • Dividends: Are dividends consistently growing in a sustainable way?

What the numbers tell you
Now, let's take a look at Sierra Wireless' key statistics:

SWIR Total Return Price Chart

SWIR Total Return Price data. Source: YCharts.

Passing Criteria

3-Year* Change 


Revenue growth > 30%



Improving profit margin



Free cash flow growth > Net income growth

160.2% vs. 485.6%


Improving EPS



Stock growth (+ 15%) < EPS growth

88.8% vs. 487.5%


Source: YCharts. * Period begins at end of Q1 2011.

SWIR Return on Equity (TTM) Chart

SWIR Return on Equity (TTM) data. Source: YCharts.

Passing Criteria

3-Year* Change


Improving return on equity



Declining debt to equity

No debt.


Source: YCharts. * Period begins at end of Q1 2011.

How we got here and where we're going
Sierra Wireless roars through our tests with its afterburners on to capture six out of seven passing grades, missing out on a perfect score only due to the more modest growth in its free cash flow relative to its net income. Both metrics began similarly in the red when our tracking period started, but Sierra's net income has soared to eight times the size of its free cash flow.

This discrepancy may be worth some investigation, but the fact remains that Sierra has done an excellent job pulling itself up to profitability since 2011, and investors have been rewarded along the way. Can this strong growth continue? Let's dig deeper to find out.

Sierra's shares have been on a wild ride this year after soaring throughout 2013, but the general trend has been lower, with shares still off 15% from where they started the year. Sierra's biggest move of late hit shareholders in early May, when a "weak" -- this is a relative term, as you'll see -- quarterly report sent Wall Street scurrying. The company's revenue grew by double digits, and it anticipates another double-digit top-line improvement for the in-progress second quarter, with its guidance midpoint of $129.5 million representing a 17.7% gain over the year-ago period.

The problem lies in Sierra's mediocre bottom-line expectations, but companies in highly competitive high-growth industries -- such as the Internet of Things -- ought to be expected to spend heavily to grow their market share before the industry matures. To that extent, Sierra has been acquiring machine-to-machine (M2M) assets, including In Motion, which produces vehicle-connectivity modules that now put Sierra in direct competition with fleet-management specialist CalAmp (NASDAQ:CAMP).

CalAmp recently reported an installed base of 3.5 million devices, but since Sierra claims a third of the embedded M2M module market -- far more than any competitor -- it certainly brings the heft necessary to dominate the vehicle market as well. Sierra has also been developing its own M2M platform, Legato, which may very well give it the killer edge over competition if it can achieve a large enough installed base before M2M communications make the leap from a niche to an everyday reality.

Estimates for just when this shift will take place can vary quite a bit. Analysys Mason expects the install base for M2M devices to grow sevenfold over the next decade, from 100 million today to 700 million in 2023. Networking giant Cisco (NASDAQ:CSCO) is more optimistic, as it predicts that a stunning $19 trillion in new revenue will be generated by the Internet of Things by 2020. Cisco has committed its considerable resources to growing the Internet of Things, which will certainly help Sierra over the long term -- making itself the connector of choice to an Internet of Things powered by Cisco routers and switches will get Sierra a much larger piece of that 700-million-device pie.

Putting the pieces together
Today, Sierra Wireless has many of the qualities that make up a great stock, but no stock is truly perfect. Digging deeper can help you uncover the answers you need to make a great buy -- or to stay away from a stock that's going nowhere.

Warren Buffett's worst auto-nightmare (Hint: It's not Tesla)
A major technological shift is happening in the automotive industry. Most people are skeptical about its impact. Warren Buffett isn't one of them. He recently called it a "real threat" to one of his favorite businesses. An executive at Ford called the technology "fantastic." The beauty for investors is that there is an easy way to invest in this megatrend. Click here to access our exclusive report on this stock.

Alex Planes owns shares of CALAMP CORP.. The Motley Fool recommends Cisco Systems and Sierra Wireless. The Motley Fool owns shares of Sierra Wireless. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers