KOSS Koss Corporation

Sector financial performance:

This company, primarily designs, manufactures, and sells stereo headphones for listening to music and communication/education, has been grouped into headset sector in personal items industry.
It seems that, based on the typical companies data, the demand, from gaming users and international market of headphones, for headset products has been weak and gradually declining in the past three years (down more than 7-10% annually).
The demand for headphone from US market has been solid but increased slowly driven by reducing price.
The typical companies’ gross margin is about 27-34%, which changed largely as a result of new products’ launching and promotion activities. With about average 30% SG&A as percentage of sales, the typical operating margin is about 0% in 2017.
The typical average stock price/sales ratio is about 0.7

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Company performance:

It seems that the demand, from international market, for its headphone and parts of this company has been declining in the three several years. While demand from its domestic market, especially mass merchandise retailers and e-commerce, has been strong in the past three years, it started to decline in the recent quarter as well.
The first six months of fiscal 2018 compared with the same period of 2017
Net sales decreased 8.3% primarily due to decrease in export market offset by increase in sales to domestic mass retailers and e-commerce.
The fiscal 2017 compared with 2016
Net sales decreased 7.5% primarily due to decrease in export market offset by increase in sales to domestic mass retailers and e-commerce.
The Fiscal 2016 compared with 2015
Net sales increased 7.3% primarily due to increase in export market offset by decrease in sales to domestic retailers and e-commerce except for mass merchandise retailers.
Its gross margin has decreased significantly from around 35% in 2014 down to about 28% of 2017 due to deleveraging of expenses as a result of decreased sales and products/channels mix’s shifting to lower margin products (probably lower selling price). While its SG&A as percentage of sales was improved by about 100 basis points (about 32%), its operating margin still decreased to about -4% in 2017.

Stock performance

This stock currently has a stock price/sales ratio of 0.6. We think that its stock is being relatively overvalued considering its continuingly declining demand from international market and as weel possible decrease in demand domestically.

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