Logitech (NASDAQ:LOGI), a leading computer peripherals manufacturer, beat estimates to a pulp Wednesday night. The company is clearly benefiting from the increase in demand for webcams, remote controls, and other audio products, and has a history of translating digital trends into stock market outperformance. After suffering through one too many poor-quality computer mice, I can definitely appreciate the quality and form factor of a Logitech product. Given that the company has numerous competitors in every single market it competes in, it has done a fine job of carving itself a profitable piece of the pie.
Earnings were up 33% to $0.16 a share or $30.1 million, and revenues were up 18% to $393 million. Even better, the company managed to achieve a 50% success rate on two of the key measures that fellow Fools have been harping on for the past quarter or so. Inventories were up 15% year over year, less than sales growth (the first time in a while that this has been achieved). However, the success failed to transfer over to accounts receivable, which was up a worrying 42%, more than twice sales growth. In contrast, return on equity was 27% -- continuing the trend of strong performance, since the company's five-year average return on equity is 26%.
While net margins dropped to 7.7% as part of a planned transition to a new generation of web cameras and other digital products, I think the longer-term picture should be kept in mind here. This is a company that has created a lot of shareholder value over the years, in a very competitive marketplace. Competing with Microsoft (NASDAQ:MSFT), Plantronics (NYSE:PLT), Creative (NASDAQ:CREAF), andSony (NYSE:SNE) is no easy task. Unlike other computer peripherals like printers, webcams, for example, have no disposable products like ink to make up for the poor margins on the hardware. The company has to keep a delicate balance between driving innovation in future products and stretching out the ever-shortening sales cycle as long as possible to reap profits before the product becomes obsolete -- all on what amounts to a dime-thin profit margin.
While the company seems to be fairly valued, at a P/E ratio of roughly 20 on long-term growth expectations of around 16%, the accounts receivable question is still a nagging one. I'll pass on this one, simply because there currently are far better bargains in technology, including Dell (NASDAQ:DELL) and Microsoft (at their current levels).
More Foolishness:
- Is Logitech Losing Ground?
- Can You Hear Us Now, Plantronics?
- Foolish Forecast: Look Out for Logitech
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Fool contributor Stephen Ellis owns shares of Dell. You can view his holdings here . The Fool has a disclosure policy.
