International Expansion And Made In America Strategy Will Strengthen Future Market Position

Key Takeaways

• Enhanced advertising strategy and expanded retail presence boost Byrna's brand awareness, likely driving future revenue and margin improvements.
  
• Onshoring production and international expansion strengthen operational efficiency and market diversification, supporting revenue growth and earnings stability.
  
• Increased operating expenses and reliance on marketing partnerships may pressure net margins, while geopolitical risks and supply chain challenges could impact revenue growth and profitability initiatives.

Catalysts

A less-lethal self-defense technology company, engages in the development, manufacture, and sale of less-lethal personal security solutions in the United States, South Africa, Europe, South America, Asia, and Canada.

• Byrna's extensive and successful transformation of its advertising strategy, particularly through the celebrity endorsement program and expansion into traditional media, has significantly increased brand awareness and sales, suggesting substantial future revenue growth.
  
• Opening additional physical retail stores and implementing a store-within-a-store model in partnership with Sportsman's Warehouse are expected to increase distribution and direct sales, potentially enhancing both revenue and net margins as economies of scale are realized.
  
• The onshoring of ammunition production and increased launcher production capacity, along with the Made in America strategy, are likely to improve operational efficiencies and control over supply chains, positively impacting gross margins and earnings.
  
• Expansion into international markets, particularly in Argentina with significant ammunition sales and potential tariff advantages, positions Byrna for continued revenue growth and diversification of income streams.
  
• The planned launch of a new compact launcher and diversification of product offerings are expected to appeal to a broader market, potentially resulting in higher-margin sales and increased earnings.

Byrna Technologies Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Byrna Technologies's revenue will grow by 32.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.1% today to 11.0% in 3 years time.
• Analysts expect earnings to reach $18.8 million (and earnings per share of $0.83) by about February 2028, up from $2.3 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 36.3x on those 2028 earnings, down from 293.0x today. This future PE is greater than the current PE for the CA Aerospace & Defense industry at 33.1x.
• Analysts expect the number of shares outstanding to decline by 1.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.23%, as per the Simply Wall St company report.

Byrna Technologies Future Earnings Per Share Growth

Risks

• Operating expenses increased significantly by 47% year-over-year due to higher variable selling costs and increased payroll expenses, which could negatively impact net margins if revenue growth does not continue at the same pace.
  
• The reliance on celebrity endorsements and influencer partnerships represents a potential risk if these partnerships fail to achieve expected returns on advertising spend (ROAS), which could lead to wasted marketing resources and impact revenue.
  
• The opening of new physical retail stores involves high capital expenditures and anticipated initial losses, which could pressure profit margins and require substantial time before achieving profitability.
  
• Planned international expansion could face challenges due to geopolitical risks and potential retaliatory tariffs from countries like Canada and Mexico, potentially impacting revenue growth and profitability in these markets.
  
• While the company has minimized reliance on China, any delays in fully achieving domestic sourcing for all components by 2025 could expose Byrna to supply chain disruptions and increased production costs, affecting gross margins and earnings.

Valuation

• The analysts have a consensus price target of $27.125 for Byrna Technologies based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $29.0, and the most bearish reporting a price target of just $24.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $171.5 million, earnings will come to $18.8 million, and it would be trading on a PE ratio of 36.3x, assuming you use a discount rate of 6.2%.
  
• Given the current share price of $29.64, the analyst price target of $27.12 is 9.3% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.