16/09/2018

Long Idea: Price Target $51,14

Market Cap / Price: $7,87 B / $45,28
52 Wk Low / High: $ 32,66/ $ 49,96 Analysts Consensus Price Target:
Beta / Yield: 1,02/ 1,46% $53,67
Ticker: NASDAQ: LOGI SIX: LOGN
Competition/Distribution/Production:
Fundamentals
Drivers/ Catalysts:
ISM Report on Business states increase in demand for
Computer electronics.
Continuous expansion in business segments.
Acquisition of Jaybird gives exposure to the music
industry.
Acquisition of Saitek & Astro Gaming expands the gaming
product line, especially for consoles. Which has seen a big
advance since Sony has released PS4 and Microsoft
released XBOX ONE.
Restructuring in some areas to reduce costs.
$250,000,000 worth of shares to be repurchased in the
next 3 years. Which is 3,33% of current Market Cap.
Financials:
2018 Revenue Growth : 13,46% 2017: 9,15%
Expected 2019 Revenue Growth: 13,46%
Profit Margin: 35,42%
Net Profit Margin: 8,12%
ROE: 19,85%
ROA:11,96%
ROI:19,47%
Retention Ratio: 48,78%
Bottom Line: Logitech is a global supplier of computer peripherals
and is the largest supplier in its industry. However competitors from
other industry’s are taking positions into the computer systems
industry. The company has sold its OEM operating segment, and is
taking a more focused approach to its peripherals segment.
Peripherals make up 63% of revenue and the remaining 37% is
made up of music speakers, Audio-PC wearables, and smart home
device sales. Short term Catalysts are ISM reports on business
growing and share repurchases, longer term catalysts are the
acquisition of various business and the growth in console and PC
gaming and PC’s themselves.
This Year P/E: 35,79 vs S&P: 25,16 vs Industry: 74,36 This Year EBIT Growth: 6,44%
Valuation Next Year P/E: 34,30 vs S&P=17,29
Additional Info:
 Sector: Tech, Industry: Computer Systems
Buy
Competition: Cisco, Sony, Microsoft, Apple(through
Beats Electronics), Samsung (through Harman).
Distribution: Currently moving from Air transportation to
Cargo Ships, to reduce costs. Company expects
inventories to increase.
Production: 50% of production from internal production
in China and remaining production outsourced to third
parties in South East Asia.
Management:
CEO: Bracken Darrell, 55, Since January 2013
 Served as President of Whirlpool EMEA and
Executive Vice President of Whirlpool Corporation.
CFO: Vincent Pilette, 46, Since September 2013
 Served as CFO for Electronics for Imaging Inc and
Vice President of Finance for the Enterprise Server,
Storage and Networking Group at HP.
Risks:
High Competition in the industry from Microsoft,
Samsung and Apple. The company expects competition to
increase.
Seasonality of Products, most products sold at year end
for holiday rush.
Some products have single source suppliers, which
could lead to longer lead times, or production halts.
50% of net sales is in non-U.S denominated currencies.
However hedging is taking place through derivatives.
Possible intellectual property infringements.
Difficulty in protecting intellectual property.
Global hazardous products regulations, and conflict
minerals.
U.S, China Trade War.
Company is going under a restructuring program to
minimise costs.
Stock is ordered on an as-needed basis and no long
term commitment contracts for the supply of goods exist.
The technology space is filled with products that have a
short life cycle. Thus the company needs to continuous
innovate and create new products, we see future
investment in Research & Development to increase.
Next Year EBIT Growth: 14,13%

Bottom Line: The primary reason we are interested in Logitech is because, we see continued growth opportunities for the
company as a result of its recent acquisitions. The company is getting a foothold in the music and gaming industry through its
acquisitions. Overall economic growth will help the company in its endeavor to increase sales and expand into the above
mentioned industry’s. According to a P/E ratio and relative valuation basis it looks to be overvalued compared to the S&P500
but the industry P/E is 74,36 it looks to be relatively undervalued compared to its peers. As such we see a 13% upside to a
target price of $51,14. EPS(TTM) is at $1,32 my forecast for 2019 is EPS at $1,49 vs the street at $2,05, the difference is as a
result of the street taking into account share repurchases, and thus their target price is higher, where as mine does not take
into account share repurchases as a result of the company stating that they cannot be sure if the 3 year share repurchase
program will continue.
2014 2015 2016 2017 2018 2019 2020 2021
Sales 2128713 2113947 2018100 2221427 2566863 2912299 3304222 3748888
Disclaimer: This is not investment advice, such a report is for job interview purposes only.