This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

July 2, 2010 - iRobot Corp. (IRBT-NASDAQ) designs, develops, and markets robots to the consumer, government, and industrial markets in the United States and internationally. The company offers consumer products, such as floor vacuuming robots, floor washing robots, gutter cleaning robots, pool cleaning robots, and programmable robots.

Its government and industrial products include 510 PackBot line of small, unmanned ground robots; the 310 small unmanned ground vehicle (SUGV) and 320 SUGV multi-purpose ground robots; and the 210 Negotiator, a rugged robot that performs basic reconnaissance for public safety professionals for state and local police and first responders. The company also provides its 500 PackBot products in various configurations, including EOD configuration to conduct explosive ordnance disposal, hazardous materials, search-and-surveillance, and law enforcement tasks; and ICx fido explosives detection configuration to screen packages and dangerous items, as well as iRobot 1Ka Seaglide, an unmanned underwater vehicle that is used on long endurance oceanic missions to measure temperature, salinity, depth-averaged current, and other data for oceanographers and military planners.

iRobot Corporation sells through chain stores and national retailers, as well as through the Internet to consumers, the U.S. military, and other government agencies. It has strategic alliances with The Boeing Company to develop and market a commercial version of the SUGV that is being developed under the Army's BCTM program; and Advanced Scientific Concepts, Inc. for exclusive rights to use its LADAR technology for unmanned ground vehicles. iRobot Corporation was incorporated in 1990 and is headquartered in Bedford, Massachusetts.

Most people have heard of the Roomba, the little self propelled circular vacuum cleaner that goes around the house picking up most things. iRobot makes that machine. And most investors only know the company for that one product. But as you can see from the above description, there's a lot more going on here than one autonomous, consumer product. And while the consumer has been hurt by the recession, government and military spending continued at a good pace this year, picking up most of the slack the consumer created.

2009 was an improvement in earnings, going to 13 cents a share from 3 cents in 2008. But 2007 showed 36 cents a share. So the economic slowdown hit iRobot pretty hard. But now things look much better. The 6 analysts who follow the company see earnings at 40 cents a share this year, then 56 cents in 2011. Next earnings announcement will be July 28 for second quarter results. Expect 5 cents a share which compares very favorably to the loss of 10 cents a share last year in the second period. For the third quarter, look for 6 cents a share, down a little from the 10 cents made last year in the third.

Revenues should be up 26% this year, according to the same 6 analysts. They're looking for $376.15 million, up from $298.62 million last year. Next year, expect $423.96 million.

Here's why the analysts are more sanguine for sales and profits: first quarter results were 24 cents a share, way above the loss of 7 cents a share last year. Sales jumped by 67% to $95 million. The main driver of better sales: international home-robots which had more than double the revenue of last year's first quarter, going to over $36 million. Plus there were higher average selling prices. Government and Industrial sales were up 77%. The only down segment: domestic consumer robot products. In 2009, Home Robots were 56% of sales, Government and Industrial were 44%.

Going forward, consumers will need to feel a little healthier to spend some of their discretionary funds on an unsupervised vacuum cleaner and other around the house robots. Expect continued sluggish sales in the U.S. and somewhat of a slowdown internationally as the global economy still shows no real signs of recovery.

However, the Government and Industrial division should continue to thrive and make up for most of the consumer slowdown. The defense department is ordering more of the Small Unmanned Ground Vehicles (SUGV). iRobot offers the PackBot and the FasTac Kit to accomodate. Oceanographers and the military also like the new Seaglider unmanned underwater vehicle.

Further improvements to the bottom line should also come from cost cutting that management has imposed as well as higher selling prices, and market expansion into Latin America. If the global economy shows some signs of life, expect higher sales for home robots.

There's good research and development at iRobot, with many applications for its basic unmanned vehicles yet to unfold. Management spends almost 5% of revenues on R & D. Expect to see more home products introduced over the next few years (the Roomba is still a top seller and should be for years). Also, the unmanned vehicles (land and sea) are not loaded with any weapons. That will most likely change and should mean better sales.

More numbers: Trailing P/E is 41.5 while Forward P/E is 32. Price to sales ratio is 1.41. Price to book is 3.35. Book value is $5.62. Operating margin for the last 12 months was 5.65% while Profit margin was 3.35%. Return on equity was 8.65% and Return on assets was 6.61%. Total revenues were $336.61 million. Total cash is $85.35 million. That's $3.39 a share. There is no debt. Current ratio is 3.01. Beta is .83. In the last 52 weeks, the stock is up 42%. There are 25.18 million shares outstanding with a Float of 21.13 million. Management and directors own 16.10%. Institutions have 58%. There is no dividend.

Aggressive investors like a turnaround story that is just starting. That seems to be the case with IRBT. It suffered through the last two years with lower sales and earnings, evolved, and is now ready to move ahead with new products and new markets. Now if only the global economy will co-operate.

- Company Web site: www.irobot.com

- Ted Allrich