Wearable high definition camera company GoPro is set to have one of the biggest public offerings for a consumer electronics company in decades.
But unlike other tech companies that don't produce anything tangible, and where there's been a lot more froth than substance in their public debuts, GoPro has its feet planted firmly on the ground--making an investment in the company potentially worth the effort, or so says private company data firm Sageworks.
Based on GoPro's full year 2013 data--with revenue close to $1 billion, a net profit margin of 6 percent and company valuation of $3 billion--it has a sales multiple of just 3. (Sales multiples are useful as an indication of a company's present market value compared to peers. If a sales multiple is particularly high, it may indicate an overly-stretched valuation. Although some industries, such as social media, tend to have companies with higher multiples.)
"GoPro is an IPO in the tech and electronics sectors with an earthbound valuation," says Brian Hamilton, chairman of Sageworks. "That's both terrific and rare."
Nikon, for example, which had revenue near $11 billion in 2013, has a sales multiple of 0.6. And Canon, with revenue of $36 billion for the same time period, has a sales multiple of 1. These consumer electronics stalwarts have much lower sales multiples than GoPro, because they have less chance for explosive growth than their much smaller startup peer, Sageworks says.
Compare GoPro's numbers to Twitter or Facebook, however, and you get an inkling of just how reasonable GoPro's pricing may be. Twitter, which reports tens of millions of dollars in losses, has a sales multiple near 30. Facebook, with net profit of of $1.5 billion for 2013, has a sales multiple around 20.
GoPro's earnings have fallen in recent months, with $11 million of profit on $235 million in revenue for the first quarter 2014, ended March 31. That represents a 52 percent decrease in profit and 7 percent drop in revenue, compared with the same period in 2013.
For the full year 2013, ended December 13, GoPro reported $985 million of revenue, nearly double what it reported for the same period in 2012, when it also reported a doubling of revenue. Net income for the full year 2013 was $60 million, nearly twice that for full year 2012.
Since getting whacked in March and April, the IPO market has recovered somewhat, according to public offering research company Renaissance Capital. Returns on IPOs have jumped 10 percent since the May 9th low, Renaissance reports, with the current week being one of the most active since 2000.
Tech companies could now represent a value to investors. "The tech IPOs completed this year on average are still trading below their first day closing prices, as a result there is less activity from the tech sector than you would expect in this strong IPO market," says Kathleen Smith, principal of Renaissance.
GoPro plans to sell $427 million in shares during the IPO, which the Wall Street Journal reports is the biggest amount since Duracell went public in 1991, selling $433 million in shares.
While it's shooting for big-time time money, GoPro has a much smaller business concern, namely that its CEO and personality-in-chief Nicholas Woodman is critical to the brand's success. Within the "risks" section of GoPro's filing, the company listed that one of its biggest concerns for its ongoing health is the loss of Woodman. "Mr. Woodman is critical to the strategic direction and overall management of our company as well as our research and development process... The loss of Mr. Woodman could adversely affect our business, financial condition and operating results," noted the company in its S-1 filing document.
Among other risks, GoPro says it operates in a highly competitive market: Besides traditional consumer electronics makers like Motorola, almost every smart phone maker equips mobile phones with a video camera.) It also is highly dependent on sales cycles, and needs to have a strong Christmas sales season in order to meet its earnings expectations for the year, the company reports in its S-1.
Woodman, who earned a salary of $800,000 and a bonus of $1 million in 2013, owns 49 percent of GoPro. Investment firm Sageview Capital owns 6 percent and Woodman's college chum Neil Dana, a sales executive for GoPro, owns 5.5 percent.