What is the market’s view of Immersion’s future operating performance as reflected in the current price of $7? Immersion’s common shares will need to reach $12 to achieve average annual stock market performance of 9.0% over the next 6 years. Upper quartile performance will require a $14 Immersion stock price by 2029.
Executive Summary
- Immersion’s important characteristics: high financial strength, above average expected growth, average profitability, and instability. A big positive influence on Immersion’s valuation is its superior Risk Profile.
- Low valuation, lagging shareholder returns. Current valuation levels are below average relative to the Immersion Peer Group. Recent market returns have substantially underperformed the Immersion Peer Group. Total shareholder returns expected to seriously beat the overall equity market. Based on current investor expectations, Immersion shares should reach a level of $14 by 2029 — an 12.5% per year total shareholder return. A 2029 stock price of $12 would reflect median performance and a price of $14 would be required to reach upper quartile performance.
- Immersion’s past growth is modestly above average. Historical growth has been high relative to the Immersion Peer Group and forecasted growth is relatively average. EPS Growth, Equity Growth, and Asset Growth have been superior. These factors have buoyed market perceptions of Immersion. Immersion’s historical income statement growth and balance sheet growth have diverged. Revenue growth has fallen short of asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity. Immersion’s consensus growth expectations are lower than historical growth.
- Pretax Margin is group leading. Asset Turnover is group lagging. The company has below average cash and will have to work to generate attractive investment opportunities and improve valuation.
- Risk Profile has been Immersion’s biggest valuation strength. Immersion’s risk profile is very favorable. Overall variability has been relatively low with relatively low revenue variability, only average E.P.S. variability, and above average stock price volatility. Financial Strength is relatively high and earnings’ expectations are relatively high. The debt/capital ratio has declined very significantly.
Be the first to comment