Is Research In Motion Ltd (BBRY) Still Undervalued?

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Research In Motion Ltd (NASDAQ:BBRY) is slowly regaining investors’ trust as its stock begins recovering. The company’s new line of smartphones is also augmenting its sales in recent months. Does this mean the company still undervalued? Is it time to consider buying the company’s stock?

BlackBerry’s financial reports

BlackBerry Ltd (NASDAQ:BBRY)

The company’s second quarter report (for the quarter ending May) will come out on Friday, June 28. Many expect the company’s revenue to rise mainly due to sales of BlackBerry 10. In that case, sales will increase for the first time in three quarters. The current projections are that the company delivered nearly 7.7 million smartphones in the recent quarter. In the past five quarters, Research In Motion Ltd (NASDAQ:BBRY)’s number of deliveries fell. If the projections are correct, this will bring the number of smartphones sold to a similar rate as in the first quarter of fiscal year 2013.

Out of the 7.7 million of devices sold, nearly 3.5 million are expected to be from Z10 and Q10 units. In other words, nearly half of the company’s sales came from its new line of smartphones. Some analysts expect the company will sell more than 14 million units of the BlackBerry 10 line this fiscal year. This sharp rise in sales isn’t common for Research In Motion Ltd (NASDAQ:BBRY) in recent years. Other leading smartphone companies are used to seeing this kind of high growth in revenue: In the first of 2013, Apple Inc. (NASDAQ:AAPL)‘s net revenue rose by nearly 11.2% (year-over-year).

Will BlackBerry’s rise in sales persist over time? Does it match the market average?

So is the company really recovering?

The company is sure making efforts to turn its situation around: It signed a deal with Verizon to launch BlackBerry Z10 – the new line of smartphones under Research In Motion Ltd (NASDAQ:BBRY)’s new OS.

The company’s research and development provision remains high as a percent of revenue. The table below summarizes the figures for Apple Inc. (NASDAQ:AAPL), BlackBerry and Nokia Corporation (ADR) (NYSE:NOK).

As seen, Nokia and BlackBerry lead the way with a much higher R&D out of revenue percentage than Apple Inc. (NASDAQ:AAPL)’s. Moreover, Nokia’s R&D provision reached nearly $1.2 billion in the first quarter of 2013. In comparison, Apple’s provision was only $880 million. This shows that struggling companies such as Nokia and BlackBerry are investing a lot to regain their market share.

Furthermore, Research In Motion Ltd (NASDAQ:BBRY)’s gross profitability is slightly higher than Apple’s. This is another strong point for the company. If it can keep its high profit margin, it could translate to a higher valuation.

Despite BlackBerry’s expected rise in revenue, this rally didn’t translate to a higher market share in the smartphone market: Based on Comscore’s recent market research, BlackBerry’s platform market share fell by 0.8% during the recent quarter to reach 5.1%. On the other hand, Apple’s market share rose by 1.4% to reach 39.2%. Nokia’s Symbian remained flat at 0.5%. Nokia Corporation (ADR) (NYSE:NOK) also uses Microsoft’s OS, which remained virtually unchanged at 3%. Therefore, despite the great strides both Nokia Corporation (ADR) (NYSE:NOK) and BlackBerry have made in recent months, their market share didn’t rise.

This could suggest that Research In Motion Ltd (NASDAQ:BBRY)’s rise in sales barely matched the smartphone market growth in sales.

With these facts in mind, let’s turn to examine the company’s valuation.

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