Secular growth stock iRobot Corporation (NASDAQ:IRBT) just reported blowout holiday quarter numbers. But as of this writing, iRobot stock is down about 30%.

Why? A soft fiscal 2018 guide which missed Street earnings estimates by a mile.

But a soft guide is nothing new for this company and this management team. They always guide soft. And they always smash estimates.

Plus, the guide wasn’t weak on the revenue front. Just the earnings front. And that’s because the company is spending big on several new products this year in order to sustain big long-term growth.

Near-term hit on margins for big revenue growth over the long term doesn’t sound too shabby to me. That actually sounds like a page out of the Amazon.com, Inc. (NASDAQ:AMZN) playbook.

Consequently, I’m buying this dip. I think iRobot stock is a bargain at these depressed levels.

5 Reasons To Buy iRobot Stock

First, it’s worth noting that IRBT had a stellar holiday quarter. Revenues smashed expectations. So did earnings. At 57 cents per share versus an expected 25 cents, that’s a %128 beat! Margins were up. Cash flows looked good. And signs of rising competition still didn’t show up in the numbers, despite being the biggest concern from bears.

Second, it’s also worth noting that iRobot delivered solid revenue guides for both fiscal 2018 and the next 3 years. The company expects revenues of $1.05 to $1.08 billion in fiscal 2018. That would represent growth between 19% and 22% growth year-over-year. Over the next 3 years, IRBT expects revenue growth of around 20% per year. The Street was actually looking at roughly 15% growth. So that’s a big and healthy revenue guide.

Third, it pays to remember that IRBT management almost always under-promises and over-delivers. Roughly 12 months ago, the fiscal 2017 guide called for revenues of $770 to $785 million. Fiscal 2017 revenues ended up being $884 million. Before that, the fiscal 2016 guide called for revenues of $630 to $642 million. Fiscal 2016 revenues ended up being $661 million.

So when you look at next year’s revenue guide of $1.05 to $1.08 billion, you are realistically looking at revenues north of $1.1 billion. And when you are looking at the 3-year revenue guide calling for 20% growth, you are realistically looking at 20-25% growth.

Fourth, while the profit guide for 2018 wasn’t pretty, the long-term profit guide was actually pretty good. Next year, operating margins are expected to be somewhere around 8-9%, which will lead to earnings per share of $2.35 at best, according to management. While management does under-promise and over-deliver (so realistic earnings are likely around $2.50), that is still a far cry from the $2.70 consensus estimate.

But that weak earnings guide is due to the company investing big in 2017 to launch several new products. Those new products, which may include a robotic lawnmower, will only grow the company’s leadership position in the secular growth consumer robotics market. That is exciting. Granted, it drags on margins in 2018, but it also allows for this company to sustain 20%-plus revenue growth into the foreseeable future.

Meanwhile, over the long term, management expects gross margins to stay around 50-51%. That means management doesn’t really expect competitive pressures to weigh on gross margins. And why should they? Competition has been around for several quarters now, and all gross margins have done is gone up.

Fifth, if you put the whole IRBT picture together, its easy to see that iRobot stock is undervalued. Management is calling for 20% revenue growth over the next 3 years and operating margin expansion to 10%. If you model that out, that gets you to revenues of just over $1.5 billion and operating profits of just over $150 million in 3 years.

After a 21% tax rate and on 29 million shares out, that gets you to EPS of roughly $4.10 in 3 years. That would represent roughly 30% earnings growth per year over the next 3 years. The market is currently trading at a price-to-earnings/growth (PEG) ratio of 1.3. That PEG implies a fair forward multiple on IRBT stock of 39. A 39 multiple on the midpoint of management’s 2018 EPS guide gets you to a fair value of over $86.

Bottom Line on IRBT Stock

The IRBT dip is a classic overreaction to near-term margin pressures.

But those margin pressures aren’t on the gross margin line, so competition still isn’t showing up in the numbers. The margin pressures are due to more investment, which is the result of the company launching new products which should fuel big long-term growth.

All in all, this chopping in iRobot stock is a golden buying opportunity. Despite the soft guide, the long-term growth narrative is actually strengthening thanks to a widening product portfolio.

As of this writing, Luke Lango was long IRBT and AMZN.