NasdaqGS:IDCC

Stock Analysis Report

Executive Summary

InterDigital, Inc. designs and develops technologies that enable and enhance wireless communications in the United States and internationally.

Rewards

Trading at 59.6% below its fair value

Earnings are forecast to grow 87.34% per year

Risk Analysis

Interest payments are not well covered by earnings

Dividend of 2.51% is not well covered by earnings

Large one-off items impacting financial results

Profit margins (2.8%) are lower than last year (26.4%)



Snowflake Analysis

Reasonable growth potential and slightly overvalued.


Similar Companies

NetScout Systems

NasdaqGS:NTCT

Share Price & News

How has InterDigital's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: IDCC has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

-0.9%

IDCC

-1.7%

US Communications

-1.5%

US Market


1 Year Return

-19.4%

IDCC

3.5%

US Communications

21.7%

US Market

Return vs Industry: IDCC underperformed the US Communications industry which returned 6.7% over the past year.

Return vs Market: IDCC underperformed the US Market which returned 24.7% over the past year.


Shareholder returns

IDCCIndustryMarket
7 Day-0.9%-1.7%-1.5%
30 Day6.2%0.6%1.4%
90 Day8.4%0.8%7.9%
1 Year-17.5%-19.4%5.7%3.5%24.3%21.7%
3 Year-34.1%-37.8%47.9%38.4%49.5%39.9%
5 Year25.9%15.2%75.3%55.7%72.6%53.5%

Price Volatility Vs. Market

How volatile is InterDigital's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is InterDigital undervalued compared to its fair value and its price relative to the market?

>50%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: IDCC ($55.78) is trading below our estimate of fair value ($137.94)

Significantly Below Fair Value: IDCC is trading below fair value by more than 20%.


Price To Earnings Ratio

PE vs Industry: IDCC is poor value based on its PE Ratio (222.6x) compared to the Communications industry average (21.1x).

PE vs Market: IDCC is poor value based on its PE Ratio (222.6x) compared to the US market (18.9x).


Price to Earnings Growth Ratio

PEG Ratio: IDCC is poor value based on its PEG Ratio (2.5x)


Price to Book Ratio

PB vs Industry: IDCC is overvalued based on its PB Ratio (2.2x) compared to the US Communications industry average (1.9x).


Next Steps

Future Growth

How is InterDigital forecast to perform in the next 1 to 3 years based on estimates from 5 analysts?

87.6%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: IDCC's forecast earnings growth (87.3% per year) is above the savings rate (1.7%).

Earnings vs Market: IDCC's earnings (87.3% per year) are forecast to grow faster than the US market (14.3% per year).

High Growth Earnings: earnings are expected to grow significantly over the next 3 years.

Revenue vs Market: IDCC's revenue (8.3% per year) is forecast to grow faster than the US market (7.5% per year).

High Growth Revenue: IDCC's revenue (8.3% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: IDCC's Return on Equity is forecast to be low in 3 years time (10.3%).


Next Steps

Past Performance

How has InterDigital performed over the past 5 years?

-7.4%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: IDCC has a large one-off gain of $20.4M impacting its September 30 2019 financial results.

Growing Profit Margin: IDCC's current net profit margins (2.8%) are lower than last year (26.4%).


Past Earnings Growth Analysis

Earnings Trend: IDCC's earnings have declined by -7.4% per year over the past 5 years.

Accelerating Growth: IDCC's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: IDCC had negative earnings growth (-93%) over the past year, making it difficult to compare to the Communications industry average (12.6%).


Return on Equity

High ROE: IDCC's Return on Equity (0.5%) is considered low.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is InterDigital's financial position?


Financial Position Analysis

Short Term Liabilities: IDCC's short term assets ($1.0B) exceed its short term liabilities ($334.3M).

Long Term Liabilities: IDCC's short term assets ($1.0B) exceed its long term liabilities ($490.7M).


Debt to Equity History and Analysis

Debt Level: IDCC's debt to equity ratio (54.7%) is considered high.

Reducing Debt: IDCC's debt to equity ratio has increased from 40.7% to 54.7% over the past 5 years.

Debt Coverage: IDCC's debt is not well covered by operating cash flow (9.6%).

Interest Coverage: IDCC's interest payments on its debt are not well covered by EBIT (0.7x coverage).


Balance Sheet

Inventory Level: IDCC has a low level of unsold assets or inventory.

Debt Coverage by Assets: IDCC's debt is covered by short term assets (assets are 2.3x debt).


Next Steps

Dividend

What is InterDigital's current dividend yield, its reliability and sustainability?

2.41%

Current Dividend Yield


Dividend Yield vs Market

company2.4%marketbottom25%1.4%markettop25%3.7%industryaverage2.9%forecastin3Yearsn/a

Current dividend yield vs market & industry

Notable Dividend: IDCC's dividend (2.51%) is higher than the bottom 25% of dividend payers in the US market (1.4%).

High Dividend: IDCC's dividend (2.51%) is low compared to the top 25% of dividend payers in the US market (3.66%).


Stability and Growth of Payments

Stable Dividend: Whilst dividend payments have been stable, IDCC has been paying a dividend for less than 10 years.

Growing Dividend: IDCC's dividend payments have increased, but the company has only paid a dividend for 9 years.


Current Payout to Shareholders

Dividend Coverage: With its high payout ratio (558.6%), IDCC's dividend payments are not well covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: Insufficient data to determine if a dividend will be paid in 3 years and that it will be covered by earnings.


Next Steps

Management

What is the CEO of InterDigital's salary, the management and board of directors tenure and is there insider trading?

1.8yrs

Average management tenure


CEO

William Merritt (60yo)

14.7yrs

Tenure

US$3,009,371

Compensation

Mr. William J. Merritt, also known as Bill, has been the Chief Executive Officer and President of InterDigital, Inc. since May 2, 2005. Mr. Merritt serves as the Chief Executive Officer and President of In ...


CEO Compensation Analysis

Compensation vs Market: William's total compensation ($USD3.01M) is about average for companies of similar size in the US market ($USD3.86M).

Compensation vs Earnings: William's compensation has increased by more than 20% whilst company earnings have fallen more than 20% in the past year.


Management Age and Tenure

1.8yrs

Average Tenure

56yo

Average Age

Experienced Management: IDCC's management team is not considered experienced ( 1.8 years average tenure), which suggests a new team.


Board Age and Tenure

4.5yrs

Average Tenure

57yo

Average Age

Experienced Board: IDCC's board of directors are considered experienced (4.5 years average tenure).


Insider Trading

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.


Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Management Team

  • William Merritt (60yo)

    President

    • Tenure: 14.7yrs
    • Compensation: US$3.01m
  • Jeffrey Belk (56yo)

    Executive VP of Business Development & President of the InterDigital China

    • Tenure: 1.3yrs
    • Compensation: US$316.46k
  • Henry Tirri (62yo)

    Chief Technology Officer

    • Tenure: 1.7yrs
  • Patrick Van de Wille

    Chief Communications Officer

    • Kai Öistämö (55yo)

      Chief Operating Officer

      • Tenure: 1.3yrs
      • Compensation: US$2.55m
    • James Nolan (58yo)

      Executive Vice President of Products

      • Tenure: 12.8yrs
      • Compensation: US$1.32m
    • Richard Brezski (46yo)

      CFO & Treasurer

      • Tenure: 7.7yrs
      • Compensation: US$919.53k
    • Rick Gulino (56yo)

      Chief Legal Officer

      • Tim Berghuis

        Chief Licensing Officer

        • Tenure: 2yrs
      • Melissa Leneis

        Chief Human Resources Officer

        • Tenure: 0.2yrs

      Board Members

      • Jay Markley (53yo)

        Independent Director

        • Tenure: 3.2yrs
        • Compensation: US$221.26k
      • William Merritt (60yo)

        President

        • Tenure: 14.7yrs
        • Compensation: US$3.01m
      • Phil Trahanas (48yo)

        Independent Director

        • Tenure: 3.9yrs
        • Compensation: US$221.26k
      • Doug Hutcheson (63yo)

        Chairman

        • Tenure: 4.6yrs
        • Compensation: US$271.28k
      • Jean Rankin (60yo)

        Independent Director

        • Tenure: 9.6yrs
        • Compensation: US$229.55k
      • John Kritzmacher (58yo)

        Independent Director

        • Tenure: 10.6yrs
        • Compensation: US$240.55k
      • Andrea Goldsmith (54yo)

        Member of Technical Advisory Council

        • Tenure: 9.6yrs
      • Rob Riordan

        Member of Technical Advisory Council

        • Tenure: 4.3yrs
      • Joan Gillman (56yo)

        Independent Director

        • Tenure: 2.8yrs
        • Compensation: US$224.55k
      • Todd Hylton

        Member of Technical Advisory Council

        • Tenure: 1.8yrs

      Company Information

      InterDigital, Inc.'s company bio, employee growth, exchange listings and data sources


      Key Information

      • Name: InterDigital, Inc.
      • Ticker: IDCC
      • Exchange: NasdaqGS
      • Founded: 1972
      • Industry: Communications Equipment
      • Sector: Tech
      • Market Cap: US$1.809b
      • Shares outstanding: 31.13m
      • Website: https://www.interdigital.com

      Number of Employees


      Location

      • InterDigital, Inc.
      • 200 Bellevue Parkway
      • Suite 300
      • Wilmington
      • Delaware
      • 19809
      • United States

      Listings

      TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
      IDIDB (Deutsche Boerse AG)YesCommon StockDEEURNov 1981
      IDCCNasdaqGS (Nasdaq Global Select)YesCommon StockUSUSDNov 1981
      0U3QLSE (London Stock Exchange)YesCommon StockGBUSDNov 1981

      Biography

      InterDigital, Inc. designs and develops technologies that enable and enhance wireless communications in the United States and internationally. It provides technology solutions for use in digital cellular and wireless products and networks, including 2G, 3G, 4G and IEEE 802-related products and networks. The company develops cellular technologies, such as technologies related to CDMA, TDMA, OFDM/OFDMA, and MIMO for use in 2G, 3G, and 4G wireless networks, as well as mobile terminal devices; and 3GPP technology portfolio in 5G NR, LTE-Advanced, and cellular Internet of Things (IoT) areas, as well as technologies for automobiles, wearables, smart homes, drones, and other connected consumer electronic products. It also provides video encoding and transmission technologies; technologies to enable interconnection for various access types comprising cellular, WLAN, and LPWA, as well as IoT service frameworks; interoperability and scalability solutions through oneMPOWER platform; and oneTRANSPORT data marketplace that offers common interface to vraious service providers allowing public authorities to control and monetize, and companies to access IoT data in real-time. In addition, the company engages in the development of technologies in the areas of security and analytics, sensor technologies, and other areas. Its patented technologies are used in various products that include cellular phones, tablets, notebook computers, and wireless personal digital assistants; wireless infrastructure equipment, which comprise base stations; components, dongles, and modules for wireless devices; and IoT devices and software platforms. As of December 31, 2018, the company had a portfolio of approximately 34,000 patents and patent applications related fundamental technologies that enable wireless communications, video encoding, display technology, and other areas. InterDigital, Inc. was founded in 1972 and is headquartered in Wilmington, Delaware. 


      Company Analysis and Financial Data Status

      All financial data provided by Standard & Poor's Capital IQ.
      DataLast Updated (UTC time)
      Company Analysis2020/01/29 00:17
      End of Day Share Price2020/01/28 00:00
      Earnings2019/09/30
      Annual Earnings2018/12/31


      Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.