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iRobot Corporation (IRBT), The Procter & Gamble Company (PG), Northrop Grumman Corporation (NOC): Will This Company Continue to Clean House?

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Roomba, Scooba, Braava, Looj, Vero, and Packbot. No, these aren’t new dance crazes–rather, they’re just a few of iRobot Corporation (NASDAQ:IRBT)’s  popular products. These robots vacuum, sweep, and wash floors, clean gutters and pools, and even go on reconnaissance missions for the military. These products are well ahead of their time, and the company’s potential is high. However, “potential” is the key word.

Recent performance

In the second quarter, iRobot Corporation (NASDAQ:IRBT)’s revenue jumped 17% to $130.4 million year over year. Net income increased to $8.3 million versus $7.4 million in the year-ago quarter. This growth wasn’t just seen domestically, but internationally as well. For instance, domestic revenue improved 25.9%, and international revenue received a 17.7% bump.

iRobot Corporation

Up until this point, it would seem that everything is rosy, and there’s reason to be bullish on iRobot Corporation (NASDAQ:IRBT). However, while home robot revenue skyrocketed 20% year over year, defense revenue fell 6%. The impressive performance in home robots was mostly due to effective advertising in the domestic market, the introduction of the Braava (floor-sweeping robot) internationally, and the increased availability of the Roomba (floor-vacuuming robot). iRobot shipped 15.5% more Roomba robots than it did in the year-ago quarter.

As you might have guessed, home robots have been the key growth driver for iRobot Corporation (NASDAQ:IRBT). Total home robots shipped for the quarter were 492,000, versus 426,000 in the year-ago quarter. This improvement actually holds more weight than some people might realize. Today’s consumer is value-conscious, which has led to many consumer goods companies seeing volume declines.

The bad news for iRobot is the weakening performance in defense. In the second quarter, iRobot shipped 424 defense & security robots versus just 42 in the year-ago quarter. However, the average selling price for these 424 units was just $20,000, versus an average selling price of $140,000 in the year-ago quarter. This is because iRobot has shipped more of its more-affordable FirstLook robots.

Selling and marketing expenses increased 24.1% to $22.3 million, another negative. Don’t let this sway your opinion or confidence, though; this was a necessary step, as most of the money was put toward marketing and branding. While you might know about iRobot Corporation (NASDAQ:IRBT) because you follow the stock market, it’s not likely that most people you know are even aware of its presence. If you ask them about it, they might ask if you’re referring to the movie. Therefore, iRobot must improve its brand recognition, which can only be done through marketing.

iRobot’s biggest threat is its competition, which means iRobot must consistently innovative and increase its presence in new and existing markets. The following two competitors are very different in nature, but they reflect iRobot’s presence in two different markets.

Cleaning houses and cleaning house

Every home needs to be cleaned. These homes can be cleaned using robots, as previously discussed, or they can be used using more traditional methods, such as with products like Swiffer, Bounty, and Mr. Clean–ust a few of the products that The Procter & Gamble Company (NYSE:PG) offers.

The Procter & Gamble Company (NYSE:PG) is a much larger and more established company than iRobot, making it more of a defensive/dividend-paying play than a growth play. For instance, Procter & Gamble currently trades at 17 times earnings, whereas iRobot trades at 33 times earnings. In other words, if you want growth potential, you’re going to have to pay for it. Procter & Gamble also yields 3.10%, whereas iRobot doesn’t offer any yield, which is normal for a growth stock. Both companies have displayed quality debt management–iRobot and The Procter & Gamble Company (NYSE:PG) sport debt-to-equity ratios of 0.00 and 0.46, respectively.

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