Logitech International (LOGI 1.19%) is a classic example of a growth stock trading at a reasonable price, especially after its latest earnings report, which shows us that it can keep growing in a post-coronavirus world.
The computer peripherals manufacturer closed fiscal 2021 on a high. Its revenue shot up 74% year-over-year in constant currency terms to $5.25 billion, and non-GAAP earnings increased nearly 200% to $6.42 per share. Its fiscal fourth-quarter sales increased 108% over the year-ago period to $1.54 billion, crushing Wall Street's expectations for just $1.1 billion in revenue. Non-GAAP earnings of $1.45 per share also crushed the consensus estimate of $0.83 per share.
Logitech looked well-placed to beat expectations and deliver such strong numbers, as it has a habit of guiding low and overdelivering. Don't be surprised to see a similar trend continue in future quarters, as the products that Logitech sells are likely to remain in solid demand over the long run.
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Tough comparisons won't drag Logitech down
Logitech is facing tougher year-over-year comparisons in fiscal 2022 as its business took off last year amid the COVID-19 outbreak. A sharp spike in remote work, online learning, and video gaming sent Logitech's sales, earnings, and stock price soaring in 2020.
But Logitech's guidance suggests that the trends kicked off by the pandemic can last this year and beyond. The company expects flat revenue in fiscal 2022 at the midpoint of its guidance range. That might not seem attractive at first, but investors should note that the massive revenue gains Logitech scored last year won't be disappearing. This also indicates that demand for computer and gaming peripherals won't drop this year following last year's huge spike.
Analysts are looking for a decline in Logitech's revenue this fiscal year. They are also expecting the company's earnings to shrink substantially to $4.24 per share in FY22. But Logitech seems on its way to a better bottom-line figure, as evident from the stronger-than-expected revenue outlook and a bump in the operating income guidance.
Logitech has increased its non-GAAP operating income outlook for the year to a range of $800 million to $850 million, compared to the earlier range of $750 million to $850 million. Though that's lower than last year's figure of $1.27 billion, investors shouldn't forget that Logitech had originally guided for $1.1 billion in non-GAAP operating income last year.
What's more, Logitech raised its profit outlook four times in the previous fiscal year. So, it won't be surprising to see the company beat its operating income significantly as the year progresses and eventually turn in a better-than-expected bottom-line performance.
Gearing up for long-term growth
Logitech management shed light on a few secular growth trends on the latest earnings conference call that should help it keep growing in the long run. For instance, management expects companies to adopt a hybrid work culture wherein employees are expected to work from both the home and the office. Citigroup, for example, has announced that most of its workforce will be classified as hybrid workers -- working two days a week from their homes and three days out of the office.
Google parent Alphabet recently revealed that it saved $1 billion last year thanks to remote work. These are the reasons why Logitech anticipates that sales of computer peripherals such as keyboards, mice, and pointing devices will continue to remain strong.
Meanwhile, a hybrid workplace environment can lead to higher demand for video collaboration equipment in offices and encourage the purchase of PC webcams. Third-party research reports also indicate the same. The global PC peripheral market is expected to add $40 billion in revenue this year and hit a size of nearly $500 billion. By 2025, the market's revenue is expected to exceed $583 billion.
Mordor Intelligence forecasts a 9% annual growth rate for the webcam market, while the video conferencing market is expected to clock a much faster growth of 19% a year through 2026. The gaming peripheral market will also remain hot thanks to the launch of new consoles, new hardware such as graphics cards, and the rise of e-sports.
Thanks to these broad-based tailwinds, Logitech anticipates long-term revenue growth between 8% and 10%. Additionally, analysts expect the company to clock 30% annual earnings growth over the next five years. All of this makes Logitech International a solid growth stock to buy right now, especially considering that it is trading at just 20 times trailing earnings.
