Why Identiv Inc Stock Could Be Set for Big Moves


Identiv Stock to Rally on Strong Revenues and Profitability

For those of you who love finding those battered and beaten-down small technology stocks with above-average upside, Identiv Inc (NASDAQ:INVE) may be what you are looking for.

While Identiv has a relatively small market cap of under $95.0 million, the developer of identity solutions is growing its revenues and moving toward profitability as early as this year.

Trading well below its 52-week high of $6.87 and its five-year high of $21.31 on September 2014, INVE stock has the ability to provide big returns to investors.

Identiv Inc provides physical security and secure identification solutions comprised of software and hardware using radio-frequency identification technology that is based on electromagnetic fields.

The company caters to numerous sectors, including government, enterprise, consumer, education, healthcare, banking, retail, and transportation.

INVE stock has rallied 36% this year, with potentially more upside moves on the horizon as revenues ramp up and profits come into the picture.

Chart courtesy of StockCharts.com

My Fundamental Bull Case for INVE Stock

The revenue picture has been mixed, but Identiv Inc produced revenue growth of 7.2% in 2017, followed by growth of a sizzling 29.8% to a four-year high of $78.1 million in 2018.

Fiscal Year Revenue (Millions) Growth
2014 $81.3
2015 $60.8 -25.2%
2016 $56.2 -7.6%
2017 $60.2 7.2%
2018 $78.1 29.8%

(Source: “Identiv Inc.,” MarketWatch, last accessed May 2, 2019.)

The positive revenue trend is expected to continue, growing by 18.9% to $92.9 million in 2019, prior to growing by 10.8% to a record $102.9 million in 2020. (Source: “Identiv, Inc. (INVE),” Yahoo! Finance, last accessed May 2, 2019.)

Identiv recorded four straight years of negative earnings before interest, taxes, depreciation, and amortization (EBITDA) from 2014 to 2017.

However, the company’s EBITDA greatly improved in 2016, 2017, and 2018, as the below table shows:

Fiscal Year EBITDA (Millions) Growth
2014 -$3.5
2015 -$22.6 -542.4%
2016 -$5.0 78%
2017 -$1.9 61.2%
2018 $2.8 245.6%

(Source: MarketWatch, op cit.)

Identiv has yet been able to turn a generally accepted accounting principles (GAAP) and adjusted profits, but the GAAP losses have narrowed in three straight years and we could see adjusted profits in 2019.

Fiscal Year GAAP Diluted Earnings Per Share Growth
2014 -$2.11
2015 -$3.6 -71.5%
2016 -$1.3 65.5%
2017 -$0.6 51.2%
2018 -$0.4 42%

(Source: Ibid.)

Earnings after adjustments are expected to narrow to a loss of $0.01 per diluted share this year, but there is a high estimate calling for profits of $0.02 per diluted share.

Looking ahead to 2020, estimates have INVE stock earning $0.16 per diluted share. (Source: Yahoo! Finance, op cit.)

As far as the free cash flow (FCF), this has been negative in five straight years. However, Identiv reported a five-year record low of $6.5 million in 2018. Based on the company’s earnings trend, I would expect its FCF to turn positive in 2020.

Fiscal Year FCF (Millions) Growth
2014 -$13.0
2015 -$23.3 -78.9%
2016 -$6.8 71.0%
2017 -$8.8 -30.1%
2018 -$6.5 26.7%

Analyst Take

The expected ramping up of revenues and earnings for Identiv Inc should support a higher price for INVE stock down the road.

The stock trades at 31 times its 2020 earnings per share, which is not cheap, but is also less of a concern for micro-cap stocks.

If you are a trader with some risk capital, Identiv stock could be a good risk-to-reward opportunity.