FLIR designs and sells off-the-shelf thermal imaging instruments, surveillance systems and components, maritime electronics, and substance detection systems for industrial, military, security, enterprise, environmental, and consumer applications.
|Most recent||Growth rate (CAGR)|
|1 year||5 years||10 years|
|Book value of equity per share||$14.05||7.9%||3.9%||8.1%|
|BV including aggregate dividends||9.2%||6.3%||10.1%|
|1 year||5 years||10 years|
|Most recent||Growth rate (CAGR)|
|1 year||5 years||10 years|
|1 year||5 years||10 years|
A company creates wealth for its long-term shareholders in 2 main ways - through dividend payments and through the accumulation of retained earnings. This graph shows the accumulation of per-share equity of long-term shareholders (green bars), which consists of the retained earnings plus all capital invested in the company, and the cumulative dividends the company has paid over time per share of its stock (blue bars).
In the words of Warren Buffett: "We're looking for... businesses earning good returns on equity while employing little or no debt."
Return on equity is a key metric of financial performance, indicating a company's ability to generate earnings using shareholder capital. Over time, ROE is one of the major determinants of the rate at which a company creates shareholder wealth. The average ROE for large U.S. companies is 12%, and many investors use it as a threshold for attractive investments.
Companies can boost ROE by increasing leverage, which reduces the safety of the investment. Therefore, it is useful to look at the return on assets (ROA), which measures a company's earning power regardless of its capital structure. A widening gap between ROE and ROA may be a warning sign that should be thoroughly investigated.
Earnings per share is a popular metric used to value a company (using P/E ratio); growth in EPS is often used to judge company growth potential. However, many investors believe that EPS is an inferior metric to ROE, because it ignores the amount of capital the company used to generate earnings.
Free cash flow shows how much cash a company generates from operations, above and beyond what is required to maintain or expand its productive assets. This cash can be returned to investors, or spent by management on growing the company or paying back its debts.
Balance sheets of many companies contain intangible assets such as goodwill, trademarks, patents, etc. Many investors consider intangibles more difficult to value than physical assets. If intangible assets had been valued incorrectly, they must be impaired, resulting in a loss charged against shareholder equity. This chart demonstrates the potential loss to shareholder equity from such impairments.
Companies often use debt financing to increase their return on equity. However, as the amount of debt financing increases relative to the amount of equity financing, the company becomes more sensitive to down turns and other negative events. As a result, many investors use the ratio of debt to equity as a measure of a company's financial risk, and avoid companies that have this ratio above 1.
This chart shows shareholder equity as a percentage of total assets, allowing investors to judge the overall leverage. Companies with a higher proportion of equity can be viewed as safer investments. This metric is particularly important for highly leveraged institutions, such as banks, where it must be at least 4% according to government regulations.
The ratio of current assets to current liabilities is known as the current ratio. This metric is a quick measure of the company's ability to pay its short-term obligations. A current ratio below 1 is a warning sign that should be investigated, especially for companies that cannot count on adequate cash flow from operations.
This chart shows the cumulative dilution of investor ownership in a company over time. Dilution reduces an investor's participation in the future earnings. Dilution increases when a company issues new shares, and decreases when a company buys its shares back. Many investors avoid companies with large chronic dilution.
analysis provides insight into factors affecting the Return On Equity of a company.
The DuPont equation decomposes ROE as follows:
ROE = (Net margin) * (Asset turnover) * (Asset to equity ratio)
Net margin indicates operating efficiency, Asset turnover measures the total asset use efficiency, and the Asset to equity ratio is a measure of financial leverage.
The dividend payout ratio tells investors what percentage of earnings a company returns to shareholders, and what percentage it retains and reinvests. This ratio represents a major capital allocation decision by the company, and can be used to judge management rationality. Rational management should pay out all earnings that cannot be productively reinvested. Therefore, a low dividend payout ratio for a profitable company with a low growth potential may be a warning sign.
Many investors use the P/B ratio as a quick way of judging company valuation. Value investors - followers of Graham and Dodd - specifically seek out companies with low P/B ratios. However, investors should be careful not to make investment decisions on this metric alone, without considering a company's earning and growth potential, since a low P/B ratio can be a sign of a bleak future for the business.
P/E ratio is a popular way of making a quick judgment of a company valuation. Value investors - followers of Graham and Dodd - often seek solid companies with low P/E ratios as investment opportunities. However, P/E ratio represents an oversimplified approach to business valuation, and can often lead to incorrect investment decisions.
The acquisition, which was effective December 1, 1997, was accomplished through the issuance of 4,162,000 shares of the Company's common stock to AGEMA's parent company, Spectra-Physics AB, also headquartered in Stockholm, in exchange for all the outstanding shares of AGEMA stock. The transaction was accounted for as a purchase and, accordingly, the results of operations of the AGEMA entities for the period from December 1, 1997 through December 31, 1997 are included in the consolidated results of operations.
On July 6, 1998, the Company completed a secondary public offering of 2,399,130 shares of common stock, including 1,638,630 shares of common stock issued and sold by the Company. Additionally, on July 24, 1998, the underwriters exercised the over-allotment option related to the secondary offering and the Company issued and sold an additional 359,870 shares of common stock. The net proceeds of $32.1 million were utilized to repay in full a payable to a related party, which aggregated approximately $5.0 million, and to reduce amounts outstanding under the Company's lines of credit.
Pursuant to the terms of the Agreement and Plan of Merger (the "Merger Agreement") dated as of March 19, 1999 by and among the Company, IRABU Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of the Company ("Merger Sub"), Inframetrics, Inc., a Delaware corporation ("Inframetrics") and the stockholders of Inframetrics, Merger Sub was merged with and into Inframetrics effective as of March 30, 1999 (the "Effective Time"). The shares of capital stock of Inframetrics outstanding immediately prior to the effective time were converted into and exchanged for a total of 2,107,552 shares of the Company's common stock (including 210,755 shares of the Company's common stock to be held in escrow to secure the indemnification obligations of the stockholders of Inframetrics until September 26, 1999). In addition, all options to purchase Inframetrics common stock that were outstanding immediately prior to the effective time were assumed by the Company. A total of 192,439 shares of the Company's common stock are issuable upon the exercise of the stock options assumed by the Company in the Merger. The transaction was accounted for as a pooling of interests and, therefore, financial statements for all periods presented have been restated to reflect combined operations and financial position for all such periods.
On January 6, 2004, pursuant to the terms of the Agreement and Plan of Merger and Reorganization dated as of October 21, 2003 by and among the Company, Indigo Systems Corporation (Indigo), Fiji Sub, Inc., and William Parrish, as Shareholders Agent, Fiji Sub Inc. was merged with and into Indigo (the Merger). As a result of the Merger, Indigo became a wholly-owned subsidiary of the Company. Prior to the Merger, Indigo was a privately held company that focused on developing and supplying advanced infrared cameras and components, covering the entire infrared spectrum. Indigo has provided infrared cameras, software, and enclosure solutions for commercial, industrial, security, military and research and development applications. All outstanding shares of Indigo capital stock and certain warrants outstanding immediately prior to the Merger were converted into the right to receive cash in an amount equal to $25.3537 per share, or an aggregate of approximately $165,478,000. Each option to purchase Indigo capital stock outstanding immediately prior to the Merger was assumed by the Company. 709,945 shares of the Companys common stock valued at $23,728,000 are issuable by the Company upon exercise of the Indigo stock options assumed by the Company in the Merger. Ninety percent of the cash consideration was paid out following the Merger with the remaining ten percent paid into and held in an escrow account, until the first anniversary of the Merger, to satisfy any indemnification claims against Indigo that may arise. The acquisition was accounted for as a business combination under SFAS 141, Business Combination. The Consolidated Statement of Operations for the three months ended March 31, 2004 includes the results of operations of Indigo for the period beginning on January 6, 2004 through March 31, 2004. The Company allocated the purchase price of $192,118,000.
In May 2010, the Company acquired all of the outstanding stock of Raymarine Holdings Limited, a leading provider of a comprehensive range of electronic equipment for recreational boating and light commercial marine markets, for approximately $177.8 million in cash. The Company has recorded $67.7 million of identifiable intangible assets and $91.6 million of goodwill, in conjunction with the Raymarine acquisition.
In October 2010, the Company acquired all of the outstanding stock of ICx, a leading provider of integrated advanced sensing technologies for homeland security, force protection and critical infrastructure applications, for approximately $264.2 million in cash. In addition, the Company assumed certain outstanding ICx stock options and unvested restricted stock units. As a result, 331,386 shares of the Company's common stock valued at $2.1 million are issuable by the Company upon exercise of the ICx stock options and vesting of ICx restricted stock units. In connection with the acquisition, the Company has begun pursuing the sale of certain business units, including Transportation Solutions, which are not a strategic fit with the Company and expects to complete the sale in 2011. The net loss of $0.5 million for these business units have been reported as discontinued operations for the year ended December 31, 2010. These business units had assets totaling approximately $17.9 million and liabilities of approximately $3.5 million as of December 31, 2010. The Company has recorded $57.4 million of identifiable intangible assets and $110.6 million of goodwill, in conjunction with the ICx acquisition.
On November 30, 2015, the Company acquired 100% of the outstanding stock of DVTEL Inc., a provider of software and hardware technologies for advanced video surveillance, for approximately $97.5 million in cash. At December 31, 2015, the Company initially reported net tangible assets of $12.1 million in the respective balance sheet accounts, $27.4 million of identified intangible assets, and $58.0 million of goodwill, which has been recorded within the Company's Security segment. During the fourth quarter of 2016 the Company finalized the purchase price allocation, resulting in a $1.3 million decrease to tangible assets, $1.2 million decrease to net deferred taxes, and a corresponding $2.5 million increase in goodwill.
On November 4, 2016, the Company closed a transaction to acquire the assets of Point Grey Research Inc., a global leader in the development of advanced visible imaging cameras and solutions that are used in industrial automation systems, medical diagnostic equipment, people counting systems, intelligent traffic systems, military and defense products, and advanced mapping systems, for approximately $259.2 million in cash, subject to customary post-closing adjustments. The Company has performed a preliminary purchase price allocation which resulted in an allocation of $39.8 million to identifiable intangible assets and 183.7 million to goodwill which has been recorded in the Companys OEM & Emerging Markets segment.