InvenSense: Time to Buy

InvenSense (INVN) recently posted impressive results for the second quarter, 2016 by beating the top-line and the bottom-line guidance. The quarter posted revenue growth of 24.8% to $112.5 million, beating the revenue estimate of $111.0 million from $90.2 million for the second quarter, 2015, driven by higher volume shipments. Further, the total unit shipments scaled up by 40% in the quarter. Also, for the quarter, Samsung and Apple accounted for 19% and 34% of net revenue, where Apple has pressured the margin rate and is expected that it will continue to put pressure on the margins.

Strong performance across the board

In addition, the Non-GAAP gross profit went up to $49.4 million for the quarter from $33.6 million for the second quarter, 2015.
Moving ahead to expenses, the non GAAP Operating expenses scaled up to $31.3million from $27.3million for the second quarter, 2015. Further, the Research and development expenses increased to $25 million from $21 million for the same period, 2015 and the Selling, General and Administrative expenses increased to $15.2 million from $14.6 million for the second quarter, 2015.

Furthermore, the Non-GAAP Net Income moved up to $14.8 million from $3.9 million for the second quarter, 2015. InvenSense’s Non-GAAP Diluted Earnings per share scaled up to $0.16 for the quarter from $0.5 for the second quarter, 2015.

Revenue from Smartphone and Tablet Devices for InvenSense dropped to $69.8 million, which is 62% of net revenue from $71.7 million for the second quarter, 2015. Revenue from Optical image stabilization went up to $20.7 million, being 18% of net revenue from $7.0, being 8% of net revenue million for the same period, previous year. Revenue from Gaming and other scaled up to $21.9, being 20% on net revenue million from $11.5 million, being 13% of net revenue for the second quarter, 2015.

On a geographical basis, the revenue of InvenSense from United States scaled up to $42.9 million from $29.6 million for the second quarter, 2015. The revenue from Korea dropped to $24.4 million from $35.1 million for the second quarter, 2015. The revenue from China went up to $26 million from $12.5 million for the second quarter, 2015. The revenue growth from China and United States reflects the growth in demand of company’s products, mostly by mobile device customers. Revenue from Japan increased to $8 million from $5.9 million for the second quarter, 2015. Further, the revenue from Taiwan went up $7.5 million from $5.2 million for the second quarter, 2015 and the revenue from rest of the world moved up to $3.5 million from $1.8 million for the second quarter, 2015.

Product development to drive growth

The latest voice remote control and motion by InvenSense have enhanced gaming support, voice and gesture interfaces and content navigation.

The company further announced Coursa Sports which is a fitness tracking platform on cloud based software as a service for smartphones and smartwatches fitness and health applications.

In addition, the company has brought InvenSense Firefly development kit and SensorStudio, which is a development platform and Sensor prototyping for applications of Internet of things.

InvenSense has entered into partnership with Honestar Technologies Co. Ltd and GH Development Holdings Ltd. As a result of this partnership, both the companies will be offering the complete portfolio of InvenSense solutions, MEMS motion and evaluation boards.

Cash flow is improving

The cash flow from Operating Activities was $58.7 million at the end of six month period, 2016, driven by the change in non cash expenses and operating assets and liabilities, compared to a cash outgo in Operating Activities of $2.7 million, for the same period, 2015, driven by rise in operating assets and liabilities and net loss. The cash used in Investing Activities was of $77.8 million at the end of six month period, 2016, reflecting the purchase of property and equipment and available for sale investments, compared to Cash flow from Investing Activities of $9.4 million for the same period, previous year, affected by the maturity and sale of available for sale investments. The cash flow from Financing Activities dropped to $3.6 million at the end of six month period, 2016 from $5.7 million for the same period, 2015.

Valuation and conclusion

InvenSense has trailing P/E ratio of 90.26 and forward P/E ratio of 14.03. The company further has a PEG ratio of 0.89, meaning that the company will have to pay less for its future earnings growth. The company has Price/Sales ratio of 2.26 and Enterprise Value/Revenue of 1.97. Current Ratio went up to $5.06 at the end of six-month period, 2016 from 4.48 for the same period, 2015. In addition, the Debt/Equity ratio dropped to 0.39 at the end of six-month period, 2016 from 0.51 for the same period, 2015.

To wrap up, InvenSense’s performance was solid for the second quarter, 2016 which surpassed top-line and bottom-line guidance. The quarter posted increase in revenue, gross profit and net income. The non-GAAP Diluted earnings per share also went up to $0.16 from $0.5 for the second quarter, 2015. Further the company posted PEG ratio of 0.89, making it a smart investment.
Published on Dec 17, 2015
By Yaggyaseni Mittra

Copyrighted 2016. Content published with author's permission.

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