Survival of the fittest is the only rule applicable to business units in today's dynamic business world. But how does one survive in a world of cutthroat competition? Innovate and invent. This is exactly what iRobot (Nasdaq: IRBT) is doing. The company's futuristic offerings are ensuring its strong and bright future.

The good quarter and some charged-up plans
In the recently ended third quarter, iRobot's top line surged 28% year on year from increased demand in the home robots division and higher product prices. Helping pump up revenues was an upswing in Internet-based sales to consumers. All told, the bottom got an impressive 101% boost to $14.1 million.

iRobot has been doing well for quite some time now, as its five-year revenue growth stands at an impressive 20.8%, along with five-year gross profit growth of a strong 23.4%. The company has a strong product portfolio and is also constantly strengthening through innovative additions. Its domestic products include Roomba, a vacuuming robot; Scooba, a floor-washing robot; Looj, a robotic gutter cleaner; and Verro, a robotic pool cleaner. Then there are the government and industrial products, including PackBot tactical military robots and the Small Unmanned Ground Vehicle (SUGV). Recently, the company added the Enhanced Seaglider, an unmanned underwater vehicle.

The future is also looking bright for iRobot. The company has bagged two huge contracts: one worth $21 million with the U.S. Navy, and another worth $60 million with the U.S. Army.

A better company is bound to be a tad expensive, and I believe that's the case for iRobot. The stock is trading at a P/E multiple of 25.02, which is on the higher side.


Trailing P/E


iRobot 25.02 0.92
General Dynamics (NYSE: GD) 9.26 1.25
Lockheed Martin (NYSE: LMT) 9.66 1.13
Helen of Troy (Nasdaq: HELE) 9.42 0.80
Jarden (NYSE: JAH) 12.38 0.80

Source: S&P Capital IQ.

Even though the P/E is on the higher side, the company has an attractive PEG ratio (the lower, the better). When we also take growth into consideration, the stock looks even more delicious. Should the company's growth plans play out, the stock looks pretty appealing to me even at these levels.

The Foolish bottom line
Analysts expect iRobot to grow 22.5% annually for the next five years and the industry to grow by 15.6% annually over the same period. With all its new contracts and products, iRobot has a great chance to excel even further down the road. For all that iRobot is offering, the stock looks reasonably priced to me, and I'll be putting it on my Watchlist.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.