This tech stock plays an expanding role on the machine-to-machine network known as the Internet of Things.
The company makes key digital components that connect products. Two 2017 acquisitions made significant additions to its products and software. As well, the company remains competitive by spending a high 12% of its revenue on research spending.
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SIERRA WIRELESS (Toronto symbol SW; www.sierrawireless.com) makes digital components that connect products, including smart electricity meters and vehicles, to the Internet. This is known as machine-to-machine networking, or, more generally, as the Internet of Things (IoT).
In the quarter ended March 31, 2018, the company had sales of $186.9 million. That’s up 15.9% from $161.2 million a year earlier (all figures in U.S. dollars). However, in the latest quarter, excluding one-time items, Sierra earned $3.3 million, or $0.09 a share. That’s down from $7.8 million, or $0.24, a year earlier.
First-quarter results reflect higher one-time costs from the integration of Sierra’s latest acquisition, Numerex Corporation (see below). Component supply issues also hurt the company’s profit. Still, the full-year outlook remains positive.
To remain competitive, Sierra spends a high 12% of its revenue on research. The company also buys firms with technology and products that it can use for its existing business.
Growth stocks: Latest acquisition’s services include law-enforcement tracking
Sierra’s late 2017 purchase of Numerex (symbol NMRX on Nasdaq) for $107 million in common shares is a good example of the company’s targeted growth strategy. That firm operates in the same Internet of Things market as Sierra, but it provides a range of products and software specifically tailored to the needs of distinct customer groups.
Its services include law-enforcement tracking of non-violent offenders; monitoring and tracking of waste management bins, containers and vehicles; and end-to-end tracking of factory and warehouse operations.
Earlier in 2017, Sierra paid Taiwan’s GlobalTop Technology $3.2 million for its global navigation satellite system (GNSS) business.
GNSS chips provide location-tracking for navigation and data transfer. These services have expanded thanks to connected cars, wearable devices and drones.
GlobalTop’s GNSS business helps Sierra increase its sales to existing clients in the areas of vehicle tracking and drones. The firm is already a leader in those fields.
Sierra holds cash of $70.6 million, or $1.96 a share, and has low debt. The company does not pay a dividend.
Recommendation in Stock Pickers Digest: Sierra Wireless is a buy.
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