I have been meaning to profile this stock for quite some time now, but I have been putting it off for one reason or another. Then I saw Cramer plug it on his show last Friday and I knew I had to write about it before anybody else beat me to it. I am very excited about this company’s prospects and think the stock will go much higher. Cramer actually profiled the company in his “Speculation Friday” segment, but I think the company is too solid to put in my own speculation column. The company is InterDigital Inc. (IDCC).
The company engages in the design and development of digital wireless technologies for use in cellular and wireless IEEE 802 related products. It also develops solutions for enhancing bandwidth availability and network capacity, wireless security and seamless connectivity, and mobility across networks and devices.
Dream Margins
Cramer considers it a speculative play mainly due to the fact that it is a royalty-based company and that those kinds of firms are rife with legal troubles. I don’t necessarily see it that way and think the royalty business model is incredibly profitable. IDCC sports an amazing operating margin of almost 60% along with a profit margin of 42%. Throw in an ROE of 73.5% and color me impressed. Traditional business models cannot possibly achieve numbers like this.
As the smartphone revolution rolls on, IDCC will only get stronger. With 4G coming of age, the company is poised to benefit from this new technology. CEO William Merritt stated after last quarter, “The broad improvement in our results arose from several key factors, including the contribution from new customer agreements and very strong unit volume growth from existing customers.”
The balance sheet is in awesome shape and the
valuations are cheap. The stock is trading at about 11.5x this year’s estimates of $3.47 per share. About a third of the stock price is cash, so you would be getting the rest of the business at a big discount. I think this could be a $60 stock within a year. This is only a $1.7 billion company, so it is under the radar of many investors. If it keeps posting great results, it will get more noticed and the stock will go much higher.
Cramer Beat Me To It is an article from: 
