Final week, a reader requested that I check out Immersion (Nasdaq: IMMR), a small cap licensing firm that’s on the reducing fringe of creating the way forward for haptic know-how.
So as we speak, we’re going to see what The Worth Meter has to say.
(By the way in which, I’m comfortable to maintain taking your requests. In case you have a inventory you’d like me to run by means of The Worth Meter, simply drop the ticker within the feedback part on the backside of this text.)
For these of you who aren’t acquainted, haptics enable individuals to make use of their sense of contact to interact with merchandise and expertise the digital world.
Immersion’s mental property and technological experience allow it to develop high-quality, immersive haptic experiences throughout a variety of functions, from cell gadgets and inside automobile interfaces to gaming and digital actuality.
The inventory has had a shaky experience over the previous a number of years, however its latest efficiency has been spectacular. Shares have greater than doubled since 2022 to a present value of about $10, with the inventory hovering almost 40% previously month alone.
This fast appreciation in share value has caught the eye of many traders – and prompted a better have a look at the corporate’s fundamentals and progress prospects.
Immersion at present trades at an enterprise value-to-net asset worth (EV/NAV) ratio of simply 0.7. That’s a 90% low cost to the typical EV/NAV ratio of seven for firms with constructive internet belongings.
Nonetheless, as I all the time level out, a low EV/NAV ratio alone doesn’t essentially make a inventory a screaming purchase. To get a extra full image, we additionally want to look at the corporate’s skill to generate money.
Over the previous 12 months, Immersion has recorded 4 straight quarters of constructive free money circulate. In that span, its free money circulate has averaged 6.4% of its internet asset worth. That’s modestly beneath the 8% common amongst its friends, however not up to now beneath it as to justify the clear low cost on Immersion’s EV/NAV.
The corporate’s most up-to-date quarterly outcomes underscore its robust fundamentals and its tightening grip on the haptics market.
In Q1, Immersion grew income by a jaw-dropping 517% 12 months over 12 months to $43.8 million, primarily pushed by a one-time licensing and settlement settlement with Meta Platforms. Whereas this large income progress charge is probably not sustainable in the long term, it highlights the worth of Immersion’s mental property and its skill to monetize its haptic applied sciences with main gamers within the business.
The corporate additionally posted glorious profitability and free money circulate within the quarter, bolstering its money place to a rock-solid $179 million. That provides Immersion loads of dry powder to fund new progress initiatives, make acquisitions and preserve rewarding shareholders with a gentle stream of dividends.
However maybe most enjoyable is Immersion’s gargantuan progress alternative as haptics go mainstream throughout a number of industries. As a result of proliferation of touchscreens, wearables and digital actuality gadgets, the demand for sensible and fascinating haptic suggestions is poised to skyrocket within the coming years.
Because the clear chief on this house and the proprietor of a large mental property portfolio, Immersion is ideally positioned to capitalize on this rising tide and develop its licensing mannequin.
Immersion checks all of the containers of a traditional “progress at an inexpensive value” (GARP) play: a large moat, robust and bettering financials, a below-average valuation, and publicity to a number of secular progress markets.
The inventory doesn’t come with out threat, however the threat/reward stability seems to be fairly compelling at present ranges. And for traders who can abdomen some volatility and take a multiyear view, that is the type of under-the-radar gem that might be an enormous winner in the long term.
The Worth Meter charges Immersion as “Barely Undervalued.”
As I stated above, when you’ve got a inventory that you just’d prefer to have rated by The Worth Meter, go away the ticker image within the feedback part beneath.