What's Behind iRobot (IRBT) Double-Digit Gains?

NEW YORK (TheStreet) -- Shares of iRobot (IRBT) exploded 22% to $38.20 during Tuesday's session, with trading volume of 2.5 million five times higher than its three-month average. Year to date, the stock is up 105.1%.

Investors were heaping into the stock following news Google (GOOG) had purchased robotics company Boston Dynamics over the weekend, the latest development in the progress of artificial intelligence and an indication the industry is heating up. iRobot, maker of the Roomba, develops autonomous robotic technology to solve real-world problems, particularly from a consumer endpoint.

Also whetting investors' appetite, investment firm Raymond James upgraded the stock to a "strong buy". A day earlier, boutique firm Sidoti & Company upgraded its rating to "buy".

TheStreet Ratings team rates iRobot Corp as a Hold with a ratings score of C. The team has this to say about their recommendation:

"We rate iRobot Corp (IRBT) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • IRBT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 2.76, which clearly demonstrates the ability to cover short-term cash needs.
  • 45.41% is the gross profit margin for IROBOT CORP which we consider to be strong. Regardless of IRBT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, IRBT's net profit margin of 6.26% compares favorably to the industry average.
  • The revenue fell significantly faster than the industry average of 29.2%. Since the same quarter one year prior, revenues slightly dropped by 1.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Household Durables industry and the overall market, IROBOT CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Net operating cash flow has significantly decreased to $2.58 million or 78.11% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
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