Veteran Pioneer Set to Dominate Wearable Tech
Just like mobile technology exploded into our lives a decade ago, wearable devices are quietly gatecrashing the tech scene.
With new products like the Apple Watch hitting the market in 2015, Juniper Research says wearable tech will be a $19-billion industry by 2018.
To put that in perspective, retail revenue only reached $1.4 billion last year.
So if you think wearable tech is a fad that will quickly pass, think again.
And one company in particular stands to profit the most.
In fact, it’s already thrived in the wearable tech space for 53 years…
Welcome to the Next Explosive Tech Trend
Wearable technology refers to any kind of device that you can… well, wear!
For example, there are the high-tech glasses from Google (GOOG), called Google Glass. Smartwatches are currently on the market from Samsung (SSNLF), Sony (SNE), and Qualcomm (QCOM). And Nike (NKE) has its fitness FuelBand.
But this barely scratches the surface of all the wearable devices that have been developed…
For example, in the healthcare space alone, there’s a device that can predict strokes… a wearable patch that monitors blood pressure… the world’s first wireless pacemaker… smart glasses for the blind… a smartwatch that tracks Parkinson’s Disease symptoms… a helmet for depression… and robotic exoskeletons.
The list goes on and on!
Indeed, wearable technology is on a massive growth curve that can’t be ignored.
But none of this would be possible without the groundbreaking work of early pioneers.
Like this one…
53 Years of Wearable Innovation
The company is Plantronics, Inc. (PLT). Founded in 1961, the electronics and audio technology firm makes lightweight communications headsets, phone headset systems, and various other communication products and accessories for businesses and consumers.
Its innovations have won many honors and awards over the years, and I recently met with Plantronics’ Vice President of Global Communications, Genevieve Haldeman, who gave me an inside look at the company’s history and upcoming products…
Check out the company’s huge claim to fame at the 0:52 mark, too…
With a long-standing and impressive history of designing breakthrough audio products, Plantronics is perfectly positioned to capitalize on the next wave of innovation in wearable technology.
And as you saw in the video above, it’s doing just that – even amid fierce competition in the industry.
The question is: Will that translate positively to Plantronics’ share price? You bet.
There are several factors that should help Plantronics outperform the bulk of its industry rivals…
Balance Sheet Diagnosis: Rock Solid
For starters, Plantronics has no debt.
In fact, with a quick ratio of 5.1, it’s incredibly solvent.
The quick ratio essentially measures a company’s liquid assets against its liabilities – and Plantronics could cover its debt five times over.
How does it achieve that?
Well, revenue, net income, earnings per share, and operating income have all trended higher for the past few years. Take a look…
As a result, the company is able to give a bit back to its shareholders by offering a small $0.60-per-share annual dividend (a 1.3% yield).
That’s also grown in recent years – and Plantronics is one of the only companies in its peer group to offer one.
My colleague, Alan Gula, Wall Street Daily’s Chief Income Analyst, had this to say about Plantronics’ dividend: “In April 2014, Plantronics increased its dividend payout by 50%, which we love to see, of course. Most importantly, though, the company is generating more than sufficient free cash flow (operating cash flow minus capital expenditures) to cover this higher payout.”
A 24% Gain on Tap?
To compare Plantronics to its competitors, I like to use Vitaliy Katsenelson’s Absolute P/E Valuation Model.
Katsenelson’s Absolute P/E uses five conditions to arrive at what Katsenelson considers to be a “fair value” multiple…
- Earnings growth rate
- Dividend yield
- Business risk
- Financial risk
- Earnings visibility
After running Plantronics through this formula, the model suggests that the company should be trading at $54.27, based on its “fair value.” That would represent a 24% gain from current levels.
While this is only one indication, there’s no doubt that Plantronics has successfully and reliably grown important areas of its business. And as a result, its balance sheet is rock solid.
With its small dividend payout, to boot, Plantronics is a great company to own in today’s market.
Your eyes in the Pipeline,