2023-10-24 08:04:00
Struggling with a difficult industry – because it is hyper-competitive, devoid of barriers to entry and dominated by low-cost Asian manufacturers – the specialist in computer peripherals listed in Switzerland has always managed to do well in the game.
Upstream, Logitech continues to seduce users thanks to a catalog of high-end products, designed by teams of experienced designers and regularly acclaimed by the specialized press.
This almost “luxury” positioning allows it to sell its peripherals — keyboards, mice, game controllers, headsets, webcams, speakers, etc. — at prices well above the market; this translates into much higher gross margins than its competitors.
The defense of this pricing power over the years is a feat, and deserves to be applauded. It is moreover this characteristic – coupled with buoyant momentum in the context of the acquisition of Saitek – which justified the entry of the Swiss stock into the Europa One fund a few weeks before the start of the pandemic.
Downstream, Logitech management is distinguished by very strict cost control and remarkably well-inspired management. The profits were used for stock buybacks when the stock price justified it; to pay dividends once the latter has risen; and, when circumstances were favorable, to make acquisitions wisely.
This particularly well-crafted external growth strategy has produced excellent returns on investments. Over the last decade, Logitech has managed to double its consolidated turnover and quintuple its free cash flow redistributable to shareholders. Such a performance, once more, is a feat.
The first half results published yesterday indicate a normalization of sales following the peak of the pandemic and teleworking. Turnover falls by 8%, but profit increases and, as usual, Logitech returns all of the available cash flow to its shareholders.
Management projects turnover of $4-$4.15 billion this year, and operating margins which should reach a historic record — excluding the exceptional episode of the pandemic. The market welcomed the news very well: the stock jumped 10% at the opening, reaching a valuation higher than its historical average.
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