ZAGG's 2010 Was Great. Will 2011 Be Better?

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2010 was a great year for ZAGG  (Nasdaq: ZAGG  ) . The release of Apple's (NYSE: AAPL  ) hugely successful iPad 1 and iPhone 4 boosted ZAGG's fundamentals and helped the company double its revenues.       

In case you're not familiar with the company, Utah-based ZAGG designs and manufactures protective coverings, audio accessories, and power solutions for various electronic and hand-held devices. Its flagship product is the invisibleSHIELD -- a protective film used in iPads, iPhones, and other electronic devices.

A look at the fundamentals
In just five years since its inception, ZAGG's total revenue has gone up by a staggering 7,500%. But is this figure deceiving? Let's delve a little deeper into the financials to find out.

In 2010, its year-over-year revenue grew by 98.5% compared to 2009. However, its gross profit margins fell to 49.1% from 57.5% the year before, which is mostly because costlier new products are entering the company's product portfolio. For a company with a market cap of $175 million, however, the early signs are generally good.

There was good news for investors as well as diluted EPS grew by 173.3% to $0.41. At the same time, its ROE grew to 42.5% after a brief slump in 2009. ZAGG's EBITDA went up to $17.1 million from $6.7 million. The EBITDA margin has also gone up to 22.5%, a clear indication that operational efficiency is improving. The company has done well and has managed to capitalize on several handy new gadgets introduced in 2010.

What now?
Having performed well in the last year, will ZAGG be able to continue along the same path? Apple's introduction of the smart cover, along with its launch of the iPad 2 in 2011, has disrupted a market where ZAGG's protective cover, the Zaggmate, was just beginning to excel. However, I don't see any disruptions in the market for the invisibleSHIELD, at least as far as Apple's products are concerned. We must not forget that ZAGG provides gear for smartphones from companies in addition to Apple, including Research In Motion  (Nasdaq: RIMM  ) and Motorola Mobility  (NYSE: MMI  ) , who look set to launch their versions of the tablet PC and new smartphones.

Let's wait and see if ZAGG can beat 2010 and take advantage of the launch of new tech products.

Shubh Datta doesn't own any shares of the companies listed above. Apple is a Motley Fool Stock Advisor recommendation. The Fool has written puts on Apple. Motley Fool Options has recommended a bull call spread position on Apple. The Fool owns shares of Apple. 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.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 06, 2011, at 2:27 AM, iversonj88 wrote:

    i love zagg. been holding it since it was on the OTC boards at $.50 a share. It's hard not to be biased in favor of something that has treated me so well, but I definitely see continued upward growth. I think the "surge" may be mostly past, but especially as the market expands, and maybe even as an acquisition target, Zagg deserves some consideration.

    The way I look at it, anyone who invests in production inputs centered around Apple and other tech gadgets (rare metals, microchips) should also look to invest in post-production riders like Zagg, or a company like Belkin which provides other accessories.

    Even though Zagg has generally failed to diversify its business (zaggbuds, zaggspark, zaggbox) it is even learning to target these endeavors better, with stuff like the Zaggmate. At first glance, it seems to be strengthening the umbilical with Apple, but it really represents another niche in the market that Zagg is successfully filling. All of their products are of amazing quality, but some of them have just missed the mark.

    Anyways, strong fundamentals, creative and diligent innovation, and favorable sector growth will continue to keep Zagg at the center of my real life portfolio.

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