BUBBA Smart Fish Scale And ClayCopter Will Expand Market Reach

Key Takeaways

• Innovative products and strategic retail partnerships are set to boost brand awareness, market reach, and revenue growth.
  
• The asset-light model and focus on subscription revenue support flexible operations and strong margins, enhancing profitability and growth.
  
• Exposure to overseas manufacturing risks, economic uncertainty, and competitive pressures threatens American Outdoor Brands' margins, sales, and operational efficiencies.

Catalysts

Provides outdoor products and accessories for rugged outdoor enthusiasts in the United States and internationally.

• The launch of innovative products such as the BUBBA Smart Fish Scale and the ClayCopter are expected to drive brand awareness, expand market reach, and fuel long-term sales growth, impacting future revenue.
  
• The focus on expanding distribution and increasing brand awareness through partnerships with retailers like Major League Fishing and new retail placements is likely to enhance market penetration and grow revenue.
  
• The company's asset-light model and strong balance sheet provide agility, allowing flexible responses such as managing tariff impacts and strategically deciding on production locations, which are important for maintaining healthy net margins.
  
• There is a significant emphasis on recurring and subscription revenue streams (e.g., BUBBA Pro subscription) which have higher margins and can contribute positively to net margins and earnings growth.
  
• Ongoing investments in innovative product pipelines and direct-to-consumer sales channels are expected to strengthen margins and drive sustainable revenue and earnings, supported by long-term models for profitability and growth.

American Outdoor Brands Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming American Outdoor Brands's revenue will grow by 1.1% annually over the next 3 years.
• Analysts are not forecasting that American Outdoor Brands will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate American Outdoor Brands's profit margin will increase from -0.0% to the average US Leisure industry of 5.1% in 3 years.
• If American Outdoor Brands's profit margin were to converge on the industry average, you could expect earnings to reach $11.8 million (and earnings per share of $0.98) by about September 2028, up from $-77.0 thousand today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.9x on those 2028 earnings, up from -1696.6x today. This future PE is lower than the current PE for the US Leisure industry at 23.9x.
• Analysts expect the number of shares outstanding to decline by 0.68% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.61%, as per the Simply Wall St company report.

American Outdoor Brands Future Earnings Per Share Growth

Risks

• American Outdoor Brands is exposed to risks from changing tariffs and trade regulations, particularly as many of their products are manufactured overseas, impacting their cost of goods sold and, consequently, their overall gross margins.
  
• The company's reliance on a premium product strategy makes it susceptible to shifts in consumer spending behavior, especially in an uncertain economic environment, which could affect their net sales and profitability.
  
• The company's exposure to supply chain disruptions due to its asset-light model and reliance on overseas manufacturing could lead to delays or increased costs, affecting their operational efficiencies and net margins.
  
• Competitive pressures could impact their market share in both the Outdoor Lifestyle and Shooting Sports categories, potentially affecting revenue growth if new products do not continue to capture consumer interest.
  
• Fluctuations in sales from promotional activities and slower-moving inventory could pressure their gross margins and operational efficiencies if not managed effectively, particularly in a volatile consumer demand environment.

Valuation

• The analysts have a consensus price target of $16.5 for American Outdoor Brands 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 $19.0, and the most bearish reporting a price target of just $14.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $229.7 million, earnings will come to $11.8 million, and it would be trading on a PE ratio of 20.9x, assuming you use a discount rate of 7.6%.
• Given the current share price of $10.24, the analyst price target of $16.5 is 37.9% higher.
• 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.