Logitech International S.A. (LOGI) in Apples, Switzerland, designs, manufactures, and markets products that help people connect to digital and cloud experiences worldwide. The company recently raised its fiscal 2022 outlook to between two percent and five percent sales growth compared with its earlier projection of flat (+/- 5%) sales. It also raised its non-GAAP operating income guidance range to $850-$900 million from the $800-$850 million range.

The stock has declined 10.6% in price over the past three months to close yesterday’s trading session at $73.78. In addition, it is currently trading 47.4% below its 52-week high of $140.17, which it hit on June 9, 2021.

Furthermore, its  planned increase in promotional spending, higher investment in retail point of sale marketing, and industry-wide elevated component costs make the company’s near-term prospects uncertain.

Here is what could influence LOGI’s performance in the upcoming months:

Stretched Valuation

In terms of forward EV/S, LOGI’s 2.49x is 38.7% lower than the 3.32x industry average. And its forward P/S of 2.27x is 30% lower than the 3.24x industry average. Furthermore, the stock’s forward non-GAAP P/E and EV/EBIT of 16.27x and 12.64x, respectively, are lower than the 19.85x and 16.73x industry averages.

Disappointing Financials

For its fiscal third quarter, ended Dec. 31, 2021, LOGI’s sales declined 2% year-over-year to $1.63 billion. The company’s non-GAAP operating income for the quarter decreased 37% year-over-year to $302 million. Its non-GAAP net income came in at $262.75 million, representing a 37.9% year-over-year decrease. Also, its non-GAAP EPS was  $1.55, down 37% year-over-year.

Low Profitability

In terms of trailing-12-month levered FCF margin, LOGI’s 6.97% is 30.7% lower than the 10.06% industry average. And its 1.62% trailing-12-month CAPEX/Sales is 27% lower than the 2.22% industry average. Furthermore, the company’s 43.11% trailing-12-month gross profit margin is 13% lower than the 49.54% industry average.

POWR Ratings Don’t Indicate Enough Upside

LOGI has an overall C rating, which equates to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. LOGI has a D grade for Momentum, which is consistent with its 39% loss over the past nine months and 29.4% decline over the past year.

The stock has a D grade for Growth and Sentiment. This is justified because analysts expect LOGI’s EPS and revenue to decline 27.9% and 5.1%, respectively, year-over-year to $0.88 and $1.25 billion for the fiscal quarter ending June 30, 2022.

LOGI is ranked #29 out of 45 stocks in the Technology - Hardware industry. Click here to access all of LOGI’s ratings.

Bottom Line

LOGI is currently trading below its 50-day and 200-day moving averages of $76.15 and $91.50, respectively, indicating a downtrend. Furthermore, its near-term prospects seem uncertain due to concerns over planned increased investment in marketing and innovations to support its long-term growth. So, it could be wise to wait for a better entry point in the stock.

How Does Logitech (LOGI) Stack Up Against its Peers?

While LOGI has an overall POWR Rating of C, one might want to consider investing in the following Technology - Hardware stocks with an A (Strong Buy) or B (Buy) rating: AstroNova, Inc. (ALOT), TDK Corporation (TTDKY), and Lenovo Group Limited (LNVGY).

LOGI shares were trading at $71.56 per share on Friday afternoon, down $2.22 (-3.01%). Year-to-date, LOGI has declined -13.24%, versus a -4.40% rise in the benchmark S&P 500 index during the same period.

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.

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