Research In Motion Ltd (BBRY) Proves Why You Should Never Buy on a Whim

Performance and valuation

BlackBerry has a gross margin of 33%, which makes it an underdog compared to Google’s 58% and Apple’s 40%. However, the company trumps Nokia’s 29% gross margin. Nonetheless, Research In Motion Ltd (NASDAQ:BBRY)’s operating loss margin of 5% is the worst in the group, as Nokia’s loss stands at just 1% close to break-even. Apple Inc. (NASDAQ:AAPL) is the best among the four companies with an operating margin of 31%, while Google Inc (NASDAQ:GOOG)’s stands at 25%. South Korean electronics giant Samsung on the other hand has an operating margin of 15.4%.

BlackBerry’s most recent quarter revenue grew by 9.1%, thank to a strategic launch date for its BB10 phones, but this was still below Apple’s 11.3% and Google Inc (NASDAQ:GOOG)’s 31.2%. On the other hand, Nokia’s most recent quarter revenue declined by 20.4%, while Samsung’s grew by 16.8% year-over-year.

BlackBerry’s Price to Sales ratio (P/S) of 0.48 times compared to Apple Inc. (NASDAQ:AAPL)’s 2.27 and Google’s 5.51 may seem like an undervaluation. However, this could be a calamitous value trap. The low P/S ratio is indicative of the company’s bleak outlook, and this is backed by Nokia’s P/S ratio of 0.39 times. Both Research In Motion Ltd (NASDAQ:BBRY) and Nokia continue to struggle in the smartphones market, hence their low P/S ratios.

The bottom line

There is no question about the future of the smart devices industry. It is promising. However, for the laggards like BlackBerry and Nokia, the battle is bound to prove too hot to handle. BlackBerry’s future in the smartphone market is even dimmer than before, considering the fact that Windows Phone platform has already eclipsed the BB10 platform in terms of market share.

If we were to extrapolate that trend, then the outcome for Research In Motion Ltd (NASDAQ:BBRY) could be nothing, but disappointing. If you are seeking value, then don’t bet on analyst upgrades and downgrades, not unless you are a speculator.

The article This Stock Proves Why You Should Never Buy on a Whim originally appeared on Fool.com.

Nicholas is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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