Xpel Technologies Part 2: The Lawsuit

Last week I gave an overview of Xpel Technologies (DAP.U, $1.10). If you missed it, I recommend starting there before reading on. This post reviews the patent infringement lawsuit filed on December 30th by 3M (who owns one of Xpel’s competitors). Before starting, I want to emphasize that I am not an expert in patent law, and while I have talked to professionals who do specialize in this area, I have almost certainly misinterpreted at least some part of what they’ve told me. This stuff isn’t simple.
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Xpel Technologies Part 1: Company Overview

Xpel Technologies (DAP.U, $1.05) sells paint protection film that goes on the front of cars to protect them mainly from rock chips. Paint protection film is a clear and very thin polyurethane-based material that is virtually invisible once installed. From Q4 2011 to Q1 2015, they recorded an incredible 14 consecutive quarters of at least 50% revenue growth (almost all organic). Not surprisingly, Mr. Market thought very highly of this growth and Xpel’s stock was often priced around 40-50x earnings. Inevitably that growth slowed down the past few quarters (although it remains over 30%) and the stock took a beating as a result. To top it off, on December 30th 3M (who owns one of their competitors) filed a patent infringement case against Xpel and the stock dropped another 50% on New Year’s Eve alone. It’s traded in that ballpark since. There’s a lot to say about Xpel so I’m breaking it up into two posts. This post covers all the main stuff (business overview, competition,  management, etc) and then part two will review the lawsuit.
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