iRobot Corporation (IRBT) in Bedford, Mass., designs, manufactures, and distributes robots and home innovation products. Its iRobot product line includes exclusive technology and innovative concepts in cleaning, mapping, and navigation. It has sold more than 40 million robots worldwide.

However, the company’s shares have retreated 48.5% in price over the past year and 31.7% over the past three months. In addition, closing yesterday’s trading session at $60.61, the stock is currently trading 54.9% below its 52-week high of $134.50, which it hit on March 16, 2021.

In its fourth-quarter earnings release, IRBT reported disappointing financial performance. It highlighted ongoing semiconductor chip constraints and shipping delays that impacted its ability to fulfill more than $35 million in orders. Furthermore, it expects supply chain issues to stymie its performance in the first two quarters of 2022.

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

Inadequate Financials

IRBT’s revenue has decreased 16.4% year-over-year to $455.45 million for the fourth quarter, ended Jan. 01, 2022. Its operating loss came in at $44.95 million. The company reported a $31.51 million net loss, while its loss per share amounted to $1.17. In addition, its cash and cash equivalents came in at $201.46 million, representing a 53.4% increase for the year ended Jan. 01, 2022.

Weak Profitability

IRBT’s 1.9% trailing-12-months net income margin is 70.4% lower than the 6.6% industry average. Also, its ROC and levered FCF margin are negative 0.08% and 2.5%, respectively. And its trailing-12-month cash from operations stood at a negative $31.97 million, versus the $178.83 million industry average.

POWR Ratings Reflect Uncertainty

IRBT has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. IRBT has an F grade for Growth and a D for Stability. The company’s weak financials and poor profitability are consistent with the Growth grade. In addition, the stock has a 1.19 beta, which is in sync with the Stability grade.

Among 61 stocks in the B-rated Home Improvement & Goods industry, IRBT is ranked #49.

Beyond what I have stated above, one can view IRBT ratings for Value, Quality, Sentiment, and Momentum here.

Bottom Line

While the company has grown its connected customer base by 44% and differentiated its floor care robots through superior software intelligence, it continues to struggle with semiconductor chip shortages and supply chain disruptions. Analysts expect its EPS to decline 397.6% in the current quarter (ending March 2022) and 266.7% in the next quarter (ending June 2022). Furthermore, given the company’s weak profitability and declining revenue, we think the stock is best avoided now.

How Does iRobot Corporation (IRBT) Stack Up Against its Peers?

While IRBT has an overall D rating, one might want to consider its industry peers, Acuity Brands Inc. (AYI), Masonite International Corp. (DOOR), and Duluth Holdings Inc. (DLTH), which have an overall A (Strong Buy) rating.

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