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Tickers in this Article: IRBT
iRobot (IRBT) recently beat estimates in a big way. The stock fell on the lack of a move in forward guidance, but analysts are still moving numbers higher. IRBT is the Bull of the Day as a Zacks Rank #1 (Strong Buy). Big Quarters ComingThe third and fourth quarters are the make it or break it period for retailers. That applies not only to department stores, but the companies that produce the item in those very stores. This year could be a big one for the maker of the Roomba robotic vacuum cleaner.Part of the reason the analysts keep increasing their revenue estimates for iRobot has been the increased advertising spend. The company has increased its consumer awareness through large scale media buys, especially in TV commercials. Company DescriptioniRobot makes and markets robots for the consumer, government, and industrial markets worldwide. It offers consumer products, including floor vacuuming and washing robots, floor sweeping robots, and pool and gutter cleaning robots. The company also provides defense and security products. The company was founded in 1990 and is headquartered in Bedford, Massachusetts.Earnings HistoryIt has been four and a half years (18 quarters) since IRBT produced a negative earnings surprise. That was just about the time the Bush Administration was in office. So plenty of dust and debris has been swept up since then.Zacks adds back in the options expense that the rest of Wall Street omits from earnings. So our view of the most recent quarter was a beat of $0.01 or 5% ahead of the $0.20 expectations. The rest of Wall Street saw it as an $0.11 beat of the $0.17 consensus estimate. Following the most recent earnings release, the stock fell 13% as Wall Street was looking for the beat to come with a raise in guidance. No such luck for short term oriented investors, but those in the name for the longer haul will appreciate the fact that this makes it much easier to beat estimates over the next two quarters.Not Only On the FloorYes the Roomba is the flagship product right now, but look for the Scooba - a floor washing robot - to get more attention over the next few quarters. Hardwood floors have been all the rage over the last several years, and the Swifer may have capitalized on that market, but having a robot do it for you makes for a compelling argument to switch over.The company also has a hard surface cleaning robot, one for the pool and even one for the gutter. Those cleaning robots are great, but another segment of the company is the Defense & Security robots. Most will suggest that this segment is in jeopardy due to sequestration, but I don't buy it. I believe the objective of saving lives is at a premium so instead of buying a $1B jet, the DOD would rather spend $50M on robots that detect bombs or can help in other ways.Earnings Estimates Roll HigherSince March 2013, estimates have been moving higher and higher. The Zacks Consensus Estimate for IRBT has moved from $0.80 to $0.91 in April to $0.95 in June and presently stands at $1.00.The same can be said of 2014 estimates. In March they stood at $0.93 and then moved to $1.05 in April. Another jump to $1.08 in June was followed by a final bump to the current estimate of $1.12. ValuationThe valuation picture for IRBT is not a cheap one. But in paying up for the stock now, you get some growth that is really trouncing the competition. The forward PE of 32.8x is much higher than the 14.2x industry average. When we look to over metrics, like the 3x price to book multiple, we see a similar premium to the industry average of 2.5x. Even the price to sales multiple of 2.1 feels a bit lofty, but there is good reason for this. As an industry leader IRBT is projected to see 12.8% revenue growth this year while the rest of the industry is looking at -3.5% growth. Negative growth numbers aren't what investors tend to get excited about and they also hurt the possibility of earnings growth. Speaking of earnings growth, IRBT is slated to see 88% growth in EPS this year and 12% next year. The industry average is looking for 0.5% earnings growth this year and 10% next year.The Chart The price and consensus chart for IRBT shows a few things. First and most importantly it shows that when estimates fall, the stock moves only a little to the downside. The same is not true of when earnings estimates (represented by the colored lines on the chart) are increasing. The estimates for 2013 and 2014 are moving higher, and the recent pull back in the stock is making for a wonderful entry point in the stock. Indeed, these are the droids you are looking for. Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor service, a Buy and Hold service where he recommends the stocks in the portfolio.Brian is also the editor of Breakout Growth Trader a trading service that focuses on small cap stocks and also carries a risk limiting strategy. Subscribers get daily emails along with buy, and sell alerts.Follow Brian Bolan on twitter at @BBolan1Like Brian Bolan on Facebook

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