BUSINESS
Lantronix, Inc. provides solutions for video surveillance, traffic management, infotainment systems, robotics, edge computing, and remote environment management in the Americas, Europe, the Middle East, Africa, and the Asia Pacific Japan.
INVESTMENT RATING
LTRX's future returns on capital are forecasted to exceed the cost of capital. Accordingly, the company is expected to continue to be an important Value Builder.
Lantronix has a current Value Trend Rating of C (High Neutral).
With this rating, PTR's two proprietary measures of a stock's current attractiveness are providing inconsistent signals. Lantronix has a neutral Appreciation Score of 48 but a good Power Rating of 77, resulting in the High Neutral Value Trend Rating.
Lantronix's stock is selling well below targeted value.
The current stock price of $4.11 compares to targeted value 12 months forward of $5.This neutral appreciation potential results in an appreciation score of 48 (52% of the universe has greater appreciation potential.)
Lantronix has a Power Rating of 77.
(LTRX's good Power Rating indicates that it has a higher likelihood of achieving favorable investment performance over the near to intermediate term than all but 23% of companies in the universe.)Contributing to this good Power Rating: recent price action has been extremely favorable. Offsetting factors are the Computer Communications Equipment comparison group is currently in an unfavorable position; and LTRX's earnings estimates have fallen very significantly in recent months.
INVESTMENT PROFILE
Lantronix's financial strength is below average. Financial strength rating is 31.
Relative to the S&P 500 Composite, Lantronix Inc has slightly more Value than Growth characteristics; its appeal is likely to be to Capital Gain-oriented investors; the perception is that LTRX is normal risk.
Relative weaknesses include: low historical profitability, low financial strength, high stock price volatility, and low historical growth. Lantronix's valuation is low: low dividend yield, low P/E ratio, and low price/book ratio. LTRX has unusually low market capitalization.
CURRENT SIGNALS
Lantronix's current operations are eroding.
Return on equity is falling, reflecting: falling asset utilization; declining pretax margin; and falling leverage.
Lantronix's current technical position is very weak.
The stock price is in a 0.2 month down move. The stock has declined 28.7% from its prior high. The stock price is below its 200 day moving average which is in a downtrend.
ALERTS
Lantronix Inc (NASDAQ: LTRX) suffers from extremely meaningful negative changes in investment behavior: its longer term price trend turned down, and negative upside/downside volume developed.
Recent meaningful negative changes in fundamentals have impacted Lantronix Inc (NASDAQ: LTRX): the consensus estimate for June, 2024 decreased significantly, significant quarterly earnings deceleration occurred, and the consensus estimate for June, 2025 decreased significantly.
The stock is currently rated C.
On 2/26/24, Lantronix Inc (NASDAQ: LTRX) stock rose modestly by 0.5%, closing at $4.11. However, this advance was accompanied by unusually low trading volume at 64% of normal. Relative to the market the stock has been exceptionally strong over the last nine months but has declined -2.6% during the last week.
CASH FLOW
In 2023, Lantronix experienced a significant decline in cash of -$3.77 million (-22%). Sources of cash were lower than uses.
Cash generated from 2023 EBITDA totaled +$1.76 million. Non-operating uses consumed -$0.84 million (-48% of EBITDA). Cash taxes consumed -$0.60 million (-34% of EBITDA). Re-investment in the business amounted to -$16.13 million (-918% of EBITDA). On a net basis, debt investors contributed +$5.41 million (+308% of EBITDA) while equity investors contributed +$6.64 million (+378% of EBITDA).
Lantronix's Non-operating Income, %EBITDA has experienced a downtrend over the period.
This downtrend was accompanied by stability for the Lantronix Peer Group. In most years, Lantronix was in the lower quartile and top quartile. Currently, Lantronix is lower quartile at -48% of EBITDA (-$0.84 million).
Lantronix's Cash Taxes, %EBITDA enjoyed a volatile overall uptrend over the period.
This improvement was accompanied by stability for the Lantronix Peer Group. In most years, Lantronix was in the lower quartile and top quartile. Currently, Lantronix is lower quartile at -34% of EBITDA (-$0.60 million).
Lantronix's Business Re-investment, %EBITDA has suffered a volatile overall downtrend over the period.
This downtrend was accompanied by an opposite trend for the Lantronix Peer Group. (Since 2020 Business Re-investment, %EBITDA has accelerated very sharply.) In most years, Lantronix was in the top quartile and lower quartile. Currently, Lantronix is lower quartile at -918% of EBITDA (-$16.13 million).
Lantronix's Debt Investors, %EBITDA has experienced a volatile overall uptrend over the period.
This improvement was accompanied by an opposite trend for the Lantronix Peer Group. (Since 2020 Debt Investors, %EBITDA has accelerated very sharply.) In most years, Lantronix was in the top quartile and third quartile. Currently, Lantronix is upper quartile at +308% of EBITDA (+$5.41 million).
Lantronix's Equity Investors, %EBITDA has suffered a volatile overall downtrend over the period.
This downtrend was accompanied by a similar trend for the Lantronix Peer Group. In most years, Lantronix was in the top quartile. Currently, Lantronix is upper quartile at +378% of EBITDA (+$6.64 million).
Lantronix's Change in Cash, %EBITDA has experienced a volatile overall downtrend over the period.
This downtrend was accompanied by an opposite trend for the Lantronix Peer Group. In most years, Lantronix was in the top quartile. Currently, Lantronix is lower quartile at -215% of EBITDA (-$3.77 million).
Lantronix's Cash, %Revenue has exhibited little to no overall change over the period.
This stability was accompanied by stability for the Lantronix Peer Group as well. (Since 2019 Cash, %Revenue has experienced a very sharp decline.) In most years, Lantronix was in the third quartile. Currently, Lantronix is substantially below median at +10%.
PROFITABILITY
Lantronix's operating performance since 2018 is unavailable.
The productivity of Lantronix's assets declined over the full period 2014-2023: asset turnover has suffered a very strong overall downtrend.
Lantronix's return on equity is slightly above median (-12.0%) for the four quarters ended December, 2023.
Operating performance (pretax return on assets) is slightly above median (-5.3%) reflecting asset turnover that is at median (0.91X) and slightly below median pretax margin (-5.8%).
Tax “keep” rate (income tax management) is upper quartile (114.3%) resulting in after tax return on assets that is slightly below median.
Financial leverage (leverage) is below median (1.97X).
GROWTH RATES
There are no significant differences between Lantronix's longer term growth and growth in recent years.
Lantronix's historical income statement growth and balance sheet growth have diverged. Revenue growth has fallen short of asset growth; earnings growth has exceeded equity growth.
Annual revenue growth
has been 2.8% per year. (More recently it has been 14.9%.)
Total asset growth
has been 9.6% per year.
Annual E.P.S. growth
has been 46.5% per year.
Equity growth
has been 6.7% per year.
Lantronix's consensus growth rate forecast (average of Wall Street analysts)
is 20.0% — above the average of the historical growth measures.
Relative to the Lantronix Peer Group, Lantronix's historical growth measures are erratic.
E.P.S. growth (46.5%) has been at the upper quartile. Total asset growth (9.6%) has been at median. Equity growth (6.7%) has been at median. Revenue growth (2.8%) has been below median.
Consensus growth forecast (20.0%) is at the upper quartile.
PRICE HISTORY
Over the full time period, Lantronix's stock price performance has been volatile and below market.
Between April, 2013 and February, 2024, Lantronix's stock price rose +98%; relative to the market, this was a -38% loss. Significant price moves during the period: 1) November, 2020 – October, 2021: +128%; 2) March, 2020 – August, 2020: +175%; 3) March, 2017 – October, 2017: -53%; 4) February, 2016 – March, 2017: +367%; and 5) February, 2014 – February, 2016: -68%.
TOTAL INVESTMENT RETURNS
Current annual total return performance of 20.4% is at the upper quartile relative to the S&P 500 Composite.
In addition to being at the upper quartile relative to S&P 500 Composite, current annual total return performance through January, 2024 of 20.4% is substantially above median relative to Lantronix Inc Peer Group.
Current 5-year total return performance of 17.8% is upper quartile relative to the S&P 500 Composite.
Through January, 2024, with upper quartile current 5-year total return of 17.8% relative to S&P 500 Composite, Lantronix's total return performance is at the upper quartile relative to Lantronix Inc Peer Group.
VALUATION BENCHMARKS
Relative to S&P 500 Composite, LTRX's overall valuation is quite low.
Ratio of enterprise value/assets is below median. Price/equity ratio is near the lower quartile. Ratio of enterprise value/revenue is lower quartile. Price/earnings ratio is unavailable. Ratio of enterprise value/earnings before interest and taxes is unavailable.
Relative to Lantronix Peer Group, LTRX's overall valuation is quite low.
Ratio of enterprise value/assets is at the lower quartile. Price/equity ratio is at the lower quartile. Ratio of enterprise value/revenue is near the lower quartile. Price/earnings ratio is unavailable. Ratio of enterprise value/earnings before interest and taxes is unavailable.
Lantronix has a major value gap compared to the median valuation.
For LTRX to rise to median valuation, its current ratio of enterprise value/revenue would have to rise from the current level of 1.33X to 2.70X. If LTRX's ratio of enterprise value/revenue were to rise to 2.70X, its stock price would be lower by $5 to $9.For LTRX to hit lower quartile valuation relative to the Lantronix Peer Group, its current ratio of enterprise value/revenue would have to fall from the current level of 1.33X to 1.04X. If LTRX's ratio of enterprise value/revenue were to fall to 1.04X, its stock price would decline by $-1 from the current level of $4.11.
VALUE TARGETS
LTRX's future returns on capital are forecasted to exceed the cost of capital. Accordingly, the company is expected to continue to be an important Value Builder.
Lantronix's current Price Target of $5 represents a +28% change from the current price of $4.11.
This neutral appreciation potential results in an appreciation score of 48 (52% of the universe has greater appreciation potential.)
With this neutral Appreciation Score of 48, the high Power Rating of 77 results in an Value Trend Rating of C.
Lantronix's current Price Target is $5 (+50% from the 2023 Target of $4 and +28% from the 02/26/24 price of $4.11).
This dramatic rise in the Target is the result of a +7% increase in the equity base and a +40% increase in the price/equity multiple. The forecasted increase in cost of equity has a very large negative impact on the price/equity multiple and the forecasted decline in growth has a large negative impact as well. More than offsetting these Drivers, the forecasted increase in return on equity has a huge positive impact.
PTR's return on equity forecast is 21.1% — above our recent forecasts.
Forecasted return on equity enjoyed a dramatic, variable increase between 2015 and 2023. The current forecast is significantly above the 2016 low of 4%.
PTR's growth forecast is 7.0% — significantly below our recent forecasts.
Forecasted growth enjoyed a dramatic, steady increase between 2019 and 2023. The current forecast is well above the 2019 low of 1%.
PTR's cost of equity forecast is 13.9% — slightly above recent levels.
Forecasted cost of equity suffered a dramatic, variable increase between 2015 and 2023. The current forecast is well above the 2015 low of 4.4%.
At Lantronix's current price of $4.11, investors are placing a positive value of $1 on its future investments. This view is consistent with the company's most recent performance that reflected a growth rate of 17.0% per year, and a return on equity of 10.1% versus a cost of equity of 8.9%.
PTR's 2025 Price Target of $5 is based on these forecasts and reflects an estimated value of existing assets of $4 and a value of future investments of $1.