One of the hottest stocks in late 2017 was that of consumer robotics company iRobot Corporation (NASDAQ:IRBT). Rumors started to spread before the holiday earnings report that iRobot’s robotic vacuums were a hot-selling item in November and December. Investors got excited and pushed IRBT stock up from the mid-$60s to the mid-$90s.

IRBT proceeded to report blowout fourth quarter numbers that were every bit as good as investors expected.

But the guidance missed the mark. By a mile. Earnings growth is expected to be much lower than anticipated next year due to increased marketing and R&D spend.

IRBT stock dropped all the way back to below $60. I pounded on the table that the post-earnings selloff was a buying opportunity. After all, increased marketing and R&D spend next year should lead to robust revenue growth over the next several years.

Near-term margin compression in exchange for long-term revenue growth is a worthy sacrifice. It certainly worked out well for Amazon.com, Inc. (NASDAQ:AMZN).

iRobot stock bounced quickly off those sub-$60 levels, and it got as high as $70 just a few weeks ago. But trade-war concerns have weighed on iRobot stock recently. It is back in the mid-$60s, exactly where it was before the huge November/December move.

So what’s next?

More upside. IRBT stock remains materially undervalued relative to its long-term growth prospects. Meanwhile, the raw valuation isn’t all that big and at risk to rising rates. And while trade-war concerns are something to watch, they likely won’t materialize into anything that could derail this growth narrative.

Why iRobot Stock Deserves to Trade North of $90

The robots are here. More broadly, automation is here. And the trend of automated technologies completing easy tasks is just beginning.

Why not have a robotic vacuum? Or a robotic lawnmower? Or a robot that could organize your clothes, clean up your garage, and maybe even wash your car? Yes, there are generational obstacles these technologies must overcome in order to gain mainstream traction, but it is only a matter of time. Enhanced convenience always wins out in the technology world.

Just look at ride-sharing, on-demand video streaming, social media, e-commerce, smart speakers, smart watches, and many more. All of those technologies went mainstream because they offer enhanced convenience for consumers.

Same with consumer robotics. Instead of having to complete simple yet time-consuming tasks around the house, consumers will simply have robots do these tasks for them. That is why the consumer robotics market has grown at a 20%-plus rate over the past several years.

And it will continue to grow at a 20%-plus clip over the next several years because adoption rates remain relatively low.

Only 10% of U.S. households have a robotic vacuum. More than 60% of U.S. households have Amazon Prime, while more than 50% have a Netflix, Inc. (NASDAQ:NFLX) account. Clearly, there is a ton of room for consumer robotics adoption rates to run higher.

What will drive higher adoption rates? Greater consumer awareness.

How does IRBT drive greater consumer awareness? Increased marketing spend and more products.

That is exactly what IRBT is doing this year. And yet, the market wants to punish IRBT stock for management doing exactly what is necessary to fuel a big-time growth narrative.

That is fine by me. In the mid-$60s, IRBT stock offers a great long-term investment opportunity.

This is a company which can easily grow revenues by 20% per year over the next five years given its massive addressable market, currently low adoption rates, and secular tailwinds in automation.

That would put revenues at $2.2 billion in five years. Operating margins can easily get to 10-15% by then (targeted for 10% in next two to three years). At that midpoint, that would put operating profits at $275 million.

Taking out 26% for taxes and dividing by presumably 30 million diluted shares, I arrive at somewhere around $6.80 in earnings per share in five years. A very conservative 20-times forward multiple (IRBT stock usually trades around 28 times forward earnings) gets you to a four-year forward price target of $135.

Discounting back by 10% per year, I arrive at a present value of over $90.

Bottom Line on IRBT Stock

This is a long-term winner. Trade-war risks do hang over the stock because a big part of the growth story is internationally based. But those risks aren’t at a point right now where they could derail this growth narrative long-term.

As such, IRBT stock is a big-growth, low-multiple stock with huge upside potential in a multiyear window. The rebound in this stock will continue over the next several years.

As of this writing, Luke Lango was long IRBT.