InterDigital Inc (IDCC)

[FISH21049]

InterDigital, Inc. – Value Analysis (NASDAQ:IDCC) : April 26, 2017

http://www.capitalcube.com/blog/index.php/interdigital-inc-value-analysis-nasdaqidcc-april-26-2017/

Capitalcube gives InterDigital, Inc. a score of 84.

Our analysis is based on comparing InterDigital, Inc. with the following peers – BlackBerry Limited, QuickLogic Corporation, Sony Corporation Sponsored ADR, Intel Corporation, Oclaro, Inc., Xilinx, Inc., Apple Inc. and LM Ericsson Telefon AB Sponsored ADR Class B (BBRY-US, QUIK-US, SNE-US, INTC-US, OCLR-US, XLNX-US, AAPL-US and ERIC-US).

Investment Outlook

InterDigital, Inc. has a fundamental score of 84 and has a relative valuation of UNDERVALUED.

Company Overview

Considering peers, relative outperformance over the last year and the last month suggest a leading position.

It’s current Price/Book of 4.11 is about median in its peer group.
We classify IDCC-US as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.

IDCC-US has relatively high profit margins while operating with median asset turns.

The company’s year-on-year change in revenues and earnings are better than the median among its peer group.

IDCC-US‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.

While IDCC-US‘s revenue growth in recent years has been above the peer median, the stock’s P/E ratio is less than the peer median suggesting that the company’s earnings may be peaking and the market expects a decline in its growth expectations.

The company’s level of capital investment seems appropriate to support the company’s growth.

IDCC-US has the financial and operating capacity to borrow quickly.

Leverage & Liquidity

IDCC-US has the financial and operating capacity to borrow quickly.

With debt at a relatively low 11.03% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 13.77%), and a well-cushioned interest coverage level of 20.70x, IDCC-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.

All 8 peers for the company have an outstanding debt balance.

IDCC-US has moved to a Quick & Able from an Some Capacity profile at the prior year-end.

IDCC-US‘s interest coverage is greater than (but within one standard deviation of) its four-year average interest coverage of 12.97x.

While its interest coverage increased to 20.70x from 6.86x (in 2015), its peer median decreased during this period to 12.69x from 13.99x.

Interest coverage rose 15.14 points relative to peers (and is now higher than its peer median).

IDCC-US‘s debt-EV is its lowest over the last four years and compares to a high of 37.41% in 2015.

The decrease in its debt-EV to 11.03% from 37.41% (in 2015) was also accompanied by a decrease in its peer median during this period to 13.77% from 17.07%.

Relative to peers, debt-EV fell 23.08 percentage points (and is now lower than its peer median).

Key Liquidity Items see chart in article

Company Profile

InterDigital, Inc. engages in the design and development of advanced technologies that enable and enhance wireless communications, and capabilities. It offers innovations that are used in digital cellular and wireless products and networks, including 2G, 3G, 4G and IEEE 802-related products and networks. The company was founded by Seligsohn I. Sherwin in 1972 and is headquartered in Wilmington, DE.

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