Shares of robotic-vacuum maker iRobot (IRBT 2.23%) sold off hard this morning, and remain down more than 15% in early afternoon trading.
No doubt about it, if you own shares of iRobot, that smarts. But what if you don't own iRobot (yet). Did Mr. Market just create a buying opportunity in this stock? Let's find out.
Image source: Getty Images.
In last night's report, iRobot disappointed investors by reporting fourth-quarter 2021 financial results that missed on both the top line ($455.4 million in sales) and the bottom line ($1.17 per share in losses under generally accepted accounting principles, or GAAP). Management also warned of the potential for further losses in 2022 -- potentially as much as another $0.23 per share (although there's also the potential for a $0.27 per share profit).
I won't sugarcoat it. This all sounds pretty bad -- and indeed it is pretty bad. Thanks in large part to problems with "ongoing semiconductor chip constraints and shipping delays that impacted our ability to fulfill approximately more than $35 million in orders," the company said, iRobot's earnings were slashed nearly 80% between 2020 and 2021, and as the guidance makes clear, the trend in iRobot's profits continues in a downward direction.
Free cash flow for the year was also miserable -- a complete reversal from the more than $200 million in cash profits generated in 2020, ending in roughly $62 million in cash burnt in 2021. And analysts polled by S&P Global Market Intelligence now forecast iRobot will continue burning cash this year, and generate less than half the cash in 2023 that it generated in 2020, to boot.
About the only good news I see here is that analysts think free cash flow will resume in 2023, that earnings will turn substantially positive ($2.85 per share that year), and that by 2024, iRobot will start to look healthy again, with sales 50% above 2020 levels, and earnings of $5.26 per share.
True, if you can wait that long -- if you've got the patience -- then in a few years iRobot could start to look attractive again at roughly 12 times 2024 earnings. In the meantime, however, I expect that it's going to be pretty painful owning iRobot, and you can probably find better prospects elsewhere.
