Zacks Investment Research upgraded the leading designer and manufacturer of innovative peripherals, Logitech International SA (LOGI), to a Zacks Rank #1 (Strong Buy) on Dec 10.
Why the Upgrade?
Logitech has been witnessing positive estimate revisions following strong second-quarter fiscal 2015 results. The company’s primary growth drivers included rising demand in growth categories and increasing adaptation of new mobile platforms like smartphones and tablets. Also, the company remains focused on pursuing innovation to develop new products for an enhanced customer experience.
In October, the company reported second-quarter fiscal 2015 adjusted earnings of 28 cents per share, handily surpassing the Zacks Consensus Estimate of 18 cents by a robust 55.6%.
Profits in the quarter improved on strength across all segments, primarily PC Gaming and Mobile Speakers. Together, these two categories posted a 27% increase in revenues year over year – reflecting double-digit growth for six consecutive quarters. Further, Logitech achieved a higher operating leverage on the back of its successful cost-cutting initiatives.
This apart, the company recently announced a 25% hike in its annual dividend to 27 cents per share. This translates into a dividend yield of 1.93%. Logitech’s strong cash generation capabilities and commitment to return value to its shareholders indicates the potential of the company’s current business model.
In the reported quarter, the company generated cash flow from operations to the tune of $33 million. The figure not only almost doubled year over year, but also marked the highest second-quarter cash flow in the last five years. We believe that continued increase in dividends will inspire investors’ confidence through higher returns from the stock.
Upward estimate revisions over the last 30 days led to a 6.7% rise in the Zacks Consensus Estimate for fiscal 2015 to 80 cents per share, whereas the same climbed 4.8% to 87 cents for fiscal 2016.
Other Stocks to Consider
Other stocks worth considering in the sector include Alps Electric Co. Ltd. (APELY), Mercury Systems, Inc. (MRCY) and Planar Systems Inc. (PLNR). All these stocks sport the same Zacks Rank as Logitech.
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