GoPro Inc. - Ordinary Shares - Class A

+0.03 (+0.62%)
7:59:37 PM EDT: $4.93 +0.02 (+0.41%)
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Why GoPro Is Truly Remarkable


GoPro, Inc. (GPRO)
58.361 -0.159 (-0.27%)
Sector: Consumer Durables and Apparel
Published by Capital Market Laboratories on 2015-06-16

What does the rating mean?
3-Month Stock Move: +45.4%
6-Month Stock Move: +2.4%

30-day Option Implied Volatility: 46.4%
Implied Stock Range: ($52.20, $64.50)
What does "implied stock" mean?

GPRO has done something almost every other young technology company has not been able to do, and that's turn a profit. In fact, over any twelve-month period, the company has never reported a loss. Further, the company invented a new product category for cameras ("action camera").

When we look at technology firm's between $4 billion and $11 billion in market cap, it turns out that GPRO generates the largest revenue per employee of all peers. Here's a chart showing just that, with the x-axis equal spaced (rank) and the y-axis plotting revenue per employee in $millions.

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While the company's execution has been excellent, driving annual revenue to $1.5 billion, fears have now crept in that AAPL could replace GPRO's products altogether with new features for the iPhone cameras. Those who dismiss this possibility note that GPRO's products are extremely durable, waterproof and essentially indestructible, all because the product's have only a (small) camera lens to protect, rather than an entire smartphone screen.

GPRO has some amazingly compelling phenomena going on internally that we can examine through the fundamentals, and while some bears like to call it silly names (like "camera on a stick"), I just call it "stock up 45% in three months."

Note that consensus estimate for revenue next quarter is yet another substantial increase from the quarter before.
Earnings Date EPS Revenue (Mean) Revenue (Median) Last Quarter (Actual)
2015-07-30 $0.14 $395.8 M $392.8 M $363.1 M Provided by ZACKS

Fundamentals Rating Summary

Here are the factors diving the four star rating.
Revenue (TTM US$ Millions) 1,522 966 RISING

Operating Margin (QTR) 1.065 1.08 1.16 FALLING

Net Income (TTM US$ Millions) 134 49 RISING

Levered Free Cash Flow (TTM US$ Millions) 106

Research and Development (US$ Millions) 49 29 12

Research and Development Expense/Revenue 0.136 0.122 0.047 RISING

Stock Returns and Chart

GPRO is up +45.4% over the last three months and up +2.4% over the last six months.

Before we dig into the fundamental trends that drive the rating, let's look at a two-year stock chart with 10-day momentum (on the bottom).
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Now let's examine the visualizations of the critical financial measures.

Revenue (TTM US$ Millions) 1,522966RISING

GPRO is not only growing revenue by 57.45% year-over-year, but it's 4 star fundamental rating implies that the revenue acceleration is pushing the core fundamentals of the company forward. While massive revenue growth often times comes at the expense of earnings, free cash flow and operating margins, that is not at all the case for GPRO. I note that revenue over the trailing-twelve-months now stands at an all-time high of nearly $1.6 billion. Who wants to call it "camera on a stick," now?

What do all these numbers mean?
GPRO's fundamental rating benefited these results:
1. The one-year change was positive.
2. The one-year change was greater than +20% (an extra boost to the rating).
3. The two-year change was positive.

Let's look at Revenue (TTM US$ Millions) in the chart below.

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Net Income (TTM US$ Millions) 13449RISING

As I stated in the intro, GPRO actually turns a profit (remember what that is?). Net Income (after tax profit) over the trailing twelve months (TTM) for GPRO is rising and now stands at an all-time high of $134 million. That's an increase in the most recent year from $49 (million) or a 175.34% rise. Business is good.

In our next chart we plot Net Income (TTM US$ Millions) in the blue bars and the quarterly results in the gold line. Note the rising bars from a year ago (four quarters ago).

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Research and Development (US$ Millions) 492912

A very good trend in GPRO's development surrounds its commitment to R&D. The firm has raised its investment (expense) in R&D for 10 consecutive quarters, each hitting a new all-time high. But, as we have seen from the results above, the firm is still churning out all-time high profits. I love that combination.

Several consecutive increases in R&D may be a sign of solid investment in the future (if costs are under control) and is generally a good sign that the underlying company has projects it wants to invest in. There is a tendency for some firms to slip stock based compensation expense into R&D which can be quite misleading. R&D is up 72% from last year's level of $29 million and up 312% from two-years ago ($12 million).

R&D per dollar of revenue for the latest quarter is $0.136. Last year this measure was $0.122 (it's rising).

In our final time series chart we plot Research and Development (US$ Millions) in the blue bars.

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GPRO is breaking new all-time highs in revenue and earnings, earns more revenue per employee than any technology peer and the same time has broken all-time highs in R&D for 10 consecutive quarters. The firm is well into the multi-billion dollar range of revenue and, though its young, turns a profit while growing revenue at more than 50% year-over-year. The firm appears to be sheltered from competition from Apple, and in all seems poised to continue growing in an industry segment it all but created on its own.