Logitech International's (LOGI 1.00%) share prices are off 58.7% from the all-time highs reached in June 2021. The market got too excited about the company's accelerated growth during the pandemic when remote workers and gamers were buying new webcams, headsets, and other computing gear for the extra time spent at home. Some of the fall in share price makes sense from a valuation perspective, but the stock price is now entering a buy zone for long-term investors.

From 2014 through 2019, the stock rose 251%. Over the past decade, Logitech's sales tripled, and profits improved more than 13-fold. Logitech is not dependent on a pandemic to drive growth, and management sees plenty of opportunities ahead in key markets like video conferencing and gaming.

A person using a computer with a webcam.

Image source: Getty Images.

Video is a massive opportunity for Logitech

In fiscal 2022 (ended March 31), Logitech grew sales by 4%, making for a rough comparison to a stellar 76% growth rate in fiscal 2021. The market was wrong to send the stock soaring in early 2021 on the expectation that the company could maintain that blistering rate of sales growth. However, the market is making the same mistake in the opposite direction by assuming the company's low single-digit sales growth is the new norm.

Management still sees strong demand for video conferencing tools. Currently, an estimated 10% of office rooms are video-enabled. This is a massive opportunity for Logitech and is already gaining market share in the video market. Of those rooms that already have a video camera installed, nearly 50% use Logitech. The second-closest competitor is at 15%. That is a huge gap showing that Logitech is cornering the market on webcams.

What's more, the market for these products is still expanding. IT leaders need a system of hardware and software that works seamlessly together to lower costs and the complexity of managing all these devices. Logitech is meeting this requirement with a range of products and software tailored to different industries, such as healthcare, education, and government.

Over the past decade, the video collaboration segment has grown from practically nothing to $1 billion in annual sales. Management believes this segment can grow to $2 billion in annual sales.

A chart showing Logitech's video collaboration sales history.

Image source: Logitech International.

Gaming continues to grow in popularity

Gaming is another big opportunity for Logitech. A recent study by Newzoo found that Generation Z prefers gaming over social media, streaming movies, or listening to music.

The growth of the metaverse, widely viewed as the future of the internet, where people interact in 3D virtual worlds, could push interest in gaming even higher. Newzoo found that 70% of Gen Z gamers across the U.S., U.K., China, and Japan expressed interest in hanging out in game worlds without playing the main game. This suggests that the video game industry could see a substantial rise in new players simply for the social experience games provide.

Why is this good for Logitech? Because growing interest in gaming spells rising demand for gaming PCs, which expands Logitech's customer base for new mouses, keyboards, and gaming headsets.

Total unit shipments of gaming PCs reached 65.1 million in 2021 and are expected to rise to 72.9 million, according to Statista. It's no surprise that gaming was one of Logitech's best-performing categories in the fiscal fourth quarter, with sales up 1% year over year on a constant-currency basis.

A chart showing gaming relative to Logitech's other business segments.

Image source: Logitech International.

Gaming generated $1.4 billion in sales in fiscal 2022, making it Logitech's largest sales category. While fiscal fourth-quarter sales companywide were down 20% year over year, smart investors know this doesn't reflect a normal business environment for Logitech. Analysts expect sales to grow 5% in fiscal 2023, and it should get better from there.

The stock is a steal

Management's outlook through fiscal 2027 calls for annual sales to reach between $7.7 billion and $8.4 billion, with annual operating profit of $1.1 billion to $1.4 billion. That's a compound annual growth rate of 8% for sales and 10% for operating profit over the next five years. These growth rates are consistent with pre-pandemic levels.

Logitech is dealing with the same economic headwinds as every other company. But that's why investors can buy the stock at a cheap price-to-earnings (P/E) ratio of 15 based on trailing-12-month earnings. That's well below the S&P 500 index P/E of 20 at the time of writing.

Logitech traded as high as 40 times earnings in 2018. It's not worth that much, but the modest P/E it is trading for currently undervalues the company's future opportunities. This is a promising value stock to buy in this bear market.