Logitech International S.A. (LOGI) is an Apples, Switzerland-based computer peripherals manufacturer and seller. It was the first company to produce and sell computer mice in the 1980s. With a $13.84 billion market cap, LOGI is one of the largest companies in the computer hardware industry. Also, it has an ISS Governance QualityScore of 1, indicating a low governance risk.

The company has benefited immensely from rising demand for computer accessories with the advent of the remote working era. However, supply chain disruptions and an ongoing semiconductor shortage have caused the company’s profit margins to shrink in its fiscal 2022 second quarter, ended September 30, 2021. While LOGI’s revenues increased 4% year-over-year to a record $1.31 billion, its non-GAAP operating income fell 40% from the same period last year to $211 million. Its non-GAAP EPS came in at $1.05, reflecting a 44% decline from the year-ago value.

In a Reuters interview recently, LOGI CEO Bracken Darell said, “We will have some issues delivering at the levels of demand that are out there.” He said he expects the supply chain issues to last until at least March 2022. 

Shares of LOGI have slumped 15.8% in price year-to-date and 33.9% over the past six months.

Here is what could shape LOGI’s performance in the near term:

Impressive Growth Story

LOGI’s revenues have increased at a 29.1% CAGR over the past three years. Its EBITDA and net income have risen at CAGRs of 58.1% and 62.5%, respectively, over the past three years. Its EPS has improved at a  61.3% rate per annum over the past three years, while its levered free cash flow rose at a 24.3 rate per annum over this period. In addition, both its tangible book value and total assets rose at 47.3% CAGRs over this period.

Furthermore, the company’s trailing-12-month revenues increased 59% year-over-year. Its trailing-12-month operating income rose 88.2% from the same period last year, while trailing-12-month EPS improved 37.2% from the year-ago value. And its trailing-12-month EBITDA increased 82.4% year-over-year.

Bleak Growth Prospects

Analysts expect LOGI’s revenues to decline 12% in its fiscal 2022 third quarter (ending December 2021) and 16.4% in the next quarter. The consensus EPS estimates indicate a 49.1% year-over-year decline in the current quarter, a 41.7% slump in the next quarter, and a 32% decline in the current year. Moreover, the Street expects LOGI’s EPS to decline at a 6.4% rate per annum over the next five years.

POWR Ratings Reflect Uncertainty

LOGI has an overall C rating of C, which equates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a C grade for Value and Momentum. Its 6.14 trailing-12-month Price/Book multiple is 39.9% higher than the 4.39 industry average. However, LOGI’s 18.74 non-GAAP forward P/E ratio  is 21.5% lower than the 23.88 industry average. These justify its Value grade. In addition, LOGI is currently trading below its $82.84 and $103.40 respective 50-day and 200-day moving averages, indicating a downtrend, in sync with the Momentum grade.

Of the 51 stocks in the C-rated Technology – Hardware industry, LOGI is ranked #35.

In total, we rate LOGI on eight distinct levels. Beyond what we have stated above, we have also rated LOGI for Growth, Sentiment, Stability, and Quality. View all LOGI ratings here.

Bottom Line

Because companies are extending their work-from-home policies as COVID-19 cases rise globally, LOGI is expected to witness surging demand in the coming months. However, current supply chain disruptions and a global semiconductor shortage are expected to impact the company’s profit margins adversely. Thus, we think investors should wait until LOGI’s profit margins improve before investing in the stock.

How Does Logitech International S.A. (LOGI) Stack Up Against its Peers?

While LOGI has a C rating in our proprietary rating system, one might want to consider looking at its industry peers, Digi International Inc. (DGII), Synopsys, Inc. (SNPS), and Seiko Epson Corporation (SEKEY), which have a B (Buy) rating.

LOGI shares were trading at $83.34 per share on Tuesday afternoon, up $1.48 (+1.81%). Year-to-date, LOGI has declined -14.25%, versus a 24.85% rise in the benchmark S&P 500 index during the same period.

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.

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