iRobot Corporation (NASDAQ:IRBT) has been either a wonderful or awful investment so far, depending on when you bought shares over the past year. Since September of 2016, its stock is up 97%. But if you bought shares between late June and mid-September, your investment could be down as much as 26%.

This has many investors wondering -- is iRobot Corporation a buy after the run-up and the price drop, or should you look elsewhere with your investing dollars? From where I stand, I think iRobot is a buy today, even though it's not "back up the truck" cheap. Keep reading to learn why I think now's a good time to buy shares. 

Woman looking at chalkboard with dollar signs drawn on it.

Image source: Getty Images.

Why the stock's down recently, and what investors may be missing

Since Sept. 12 -- barely a week ago from this writing -- shares of iRobot have fallen a painful 21%, after a short-seller published a report claiming that the company was overpriced and set to lose market share from a competitive entry into the robotic-vacuum market by SharkNinja. But as my colleague Steve Symington wrote, competition isn't new for the company, and management views it as an important innovative push. 

iRobot Braava cleaning a kitchen floor while a mother and child play in the background.

With vinyl floors and an infant, this author can vouch for the iRobot Braava. Image source: iRobot.

iRobot regularly invests more than 10% of its revenue in research and development. A recent legal victory shows just how powerful the company's investments in R&D have been, giving it a strong portfolio of patented technology that has consistently kept its products ahead of competitors'. 

Will this latest entrant into the robot-vacuum arena take market share from iRobot? Potentially so. After all, the company commands more than 80% of the market and is steadily growing sales to take even more share from the human-operated vacuum market. 

But looking at the bigger picture, it is a growth market, and there is probably room for multiple competitors. And despite years of attempts and no real success so far, it seems inevitable that someone will eventually gain a foothold. But that alone doesn't make iRobot a sell. To start, the company has consistently delivered the best product to the market, with its robot vacuums regularly beating out the competition in head-to-head tests. Furthermore, the robot-vacuum industry is still relatively small, with iRobot placing fewer than 3 million total units last year. 

Moreover, iRobot is more than just a robot-vacuum company, also making sweep/mop floor robots, and pool-cleaning bots. Over time, the company is almost certain to bring robots into other consumer and commercial applications. 

What about valuation?

There's no denying that a lot of iRobot's recent stock price gains were a product of investor excitement. Here's a chart that shows how its valuation has increased sharply over the past 12 months:

IRBT Chart

IRBT data by YCharts.

On both an earnings and sales multiple, iRobot's stock sells for a higher valuation than it did one year ago. At recent prices, iRobot trades for 39 times trailing-12-month earnings and 3.1 times sales. As the chart above shows, that's a pretty big increase in the premium investors have been willing to pay, even after the recent price drop. 

One Fool's verdict: It's a buy

iRobot is a stock that I encourage investors to strongly consider for three big reasons:

  • It's a dominant market leader in a growth industry.
  • Its R&D investments have given it a huge head start on the competition. 
  • It's founder-led by a CEO who has a substantial personal investment (nearly a half-million shares) in the company. 

Yes, the competition is increasing and likely to be fierce. Yes, its stock trades for a pretty rich premium to its historical valuation and the overall stock market. But if management can continue executing on its growth strategy, keep introducing new products to the market in new areas, and maintain its technological edge by steady investments in R&D, I think today's price could look like a real bargain in a decade. 

It may not be a stock for the faint of heart in the short term, but for the long term, it's a stock I'm expecting to do incredibly well. 

Jason Hall owns shares of iRobot and an iRobot Braava that keeps his vinyl floors spotless. The Motley Fool owns shares of and recommends iRobot. The Motley Fool has a disclosure policy.