Tracking the Digital Economy

Ecommerce uses just in time delivery to efficiently manage inventory and maximize profits.

Zebra Technologies (ZBRA)

The company supplies hardware and software to 10,000 businesses and organizations around the global. They hold thousands of trademarks and patents protecting their technology. The business is fairly simple by selling handheld devices to scan barcodes and RFID chips (radio-frequency identification). They also sell printers for organizations to create barcodes and RFID labels on the spot. Their hardware uses proprietary software which is constantly being improved to provide the best value to the ecommerce world. Theses services are used by the largest retails on the planet including Walmart, Apple, UPS, FedEx, Costco, Kroger and Amazon.

RFID is a game changer verse traditional barcodes. A typical barcode can only store basic information like an ID number. Whereas passive RFID and active RFID can store much more information which retailers and warehouses fine incredibly valuable. For example an active RFID chip can store about one page word document of data which business can store information such as price, color, manufacturing date, shipping date, expiration date, maintenance history, etc.

This data provides valuable insight in managing just in time inventory. The real time data allows grocery stores and other retailers to have just enough product on the shelf for a typical period of time. They will therefore not waste space on shelves or in warehouse holding extra product that could take weeks to sell.

The share price as been a rollercoaster recently with the rest of the overall market. However the business remains resilient to recessions and trade wars with a diversified customer base.

In the short term the share price will remain volatile but the business will continue to grow and could be a huge winner as more and more product is managed using RFID chips.

The company is currently worth $14 billion and has been growing sales between 4 and 13% over the last several years.

With $24 million in cash and only $1.5 billion in debt the company is in great financial standing. The company is generating $600 million in free cash flow which more than covers the interest expense of $89 million.

For a strong company with consistent growth it is trading at a reasonable EV/EBTIDA ratio of 16.3. With revenue is growing and profit margins are expanding the shares should outperform the overall market and I find shares a value if purchased below $310 per share.

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Disclosure: I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. The information provided should NOT be considered advice. The topics discussed are risky and have the potential to lose a substantial amount. I am not an investment professional and therefore do not offer individual financial advice. Please do your own research before investing.

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