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Ubiquiti: Share Buybacks Could Continue Stable Double-Digit Annual Returns

Jun. 01, 2020 2:17 PM ETUbiquiti Inc. (UI)18 Comments
Lukas Wolgram profile picture
Lukas Wolgram


  • Ubiquiti has a strong growth track record and uses profits to buy back shares.
  • The company is priced for solid returns going forward, even with multiple contractions and slowing growth.
  • The current valuation is reasonable and leads me to place a slightly bullish rating on the stock.

Ubiquiti (NYSE:UI) sells wireless data communication products and solutions. This includes many products ranging from WiFi routers to cameras to antennas. The company's full product list is available here. The company competes on many of these products with the much larger giant Cisco (CSCO), as well as a few other smaller players. Ubiquiti recently released fiscal Q3 2020 results that put up an impressive beat. GAAP EPS of $1.60 beat by $0.26, while record quarterly revenue of $337.4M beat by $27.08M. My model below illustrates further possible upside in the company with reasonably forecasted annual returns of between 6.4% and 19% over the next five years.

The stock has a volatile history, especially recently, but those that have held on have been rewarded. The stock has managed to put up very impressive returns, increasing in price several times over during the last 5-10 years.

Data by YCharts

Going forward the company is expected to bring in nearly $1.3B in revenue by the end of fiscal 2020 (which ends in June) and earn around 380M in net income for the year. 2021 expectations currently have the company growing both sales and net income by around 7%.

Source: TIKR.com

Data by YCharts
Data by YCharts

Ubiquiti has aggressively bought back shares over the last few years, reducing shares outstanding from around 90 million to just over 60 million. This along with sales and earnings growth have increased EPS considerably, leading to a strong stock price performance. I expect share buybacks to continue, along with an increasing dividend as CEO Robert Pera owns a large majority of the company and takes no salary or bonuses.

Valuation And Future Returns

In an attempt to estimate what sort of returns an investor may make buying Ubiquiti today, I have created the model below.

The first

This article was written by

Lukas Wolgram profile picture
Check out my FREE substack newsletter Uncommon Profits here: https://lukewolgram.substack.com . Ranked #1 on Tip Ranks top 25 financial bloggers for accuracy as of January 1, 2021. I focus mostly on high quality small and microcap companies that I believe can double their stock price within 3 years (26% hurdle rate).

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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