InvenSense Inc (INVN) Valuation & Momentum Indicators

InvenSense Inc (INVN) Valuation & Momentum Indicators
 InvenSense INVN EV/S vs. Revenues YoY

The chart below suggests that InvenSense Inc (NASDAQ:INVN) stock price is tracking below NTM EPS projections, an understandable dynamic following severe dislocation in Invensense’s gyro/OIS market share, particularly in Samsung smartphone.

INVN stock price vs. NTM EPS 091416

Invensense experienced elevated pricing pressure surrounding its loss of market share at Samsung. Pricing pressure translated into lower gross margins. At EV/S of ~1.8x investors seem to be implicitly assuming that the company’s historical revenue/margin challenges are likely to continue.

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INVN EV/S vs. Gross Margins

As the chart suggests, the worst of the pricing pressure appears to be behind the company, with smartphone share having stabilized, and non-smartphone categories (e.g. IoT) growing. As gross margins stabilize or expand, primarily due to growth in new categories like VR/AR, self-driving car, etc., the stock’s valuation (EV/S multiple) could also start approaching its historical range.

Stronger support for the valuation multiple could come from an inflection in YoY revenues, as the chart above illustrates. Better than expected iPhone 7/Plus shipments would help the revenue recovery, assuming no further share loss at Samsung.

Disclosure: As of this writing the acteve Model Portfolio (aMP) held a long position in INVN.
Additional Disclosures and Disclaimer
Stock market data provided by Sentieo.

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