'Looking forward they 'expect our cash balances to rise in Q4' (typically best seasonal period)...'probably end the quarter with around $90m of cash'. Which they could use to pay down revolver, call some of the notes in the summer or make inorganic acquisitions. The important aspect is that they have flexibility. With an EV given the above of prospectively just over US$900m and a recovering earnings profile I would place the company on a forward EV/ebit multiple (FY16e) of around x8s. This feels still too strategically low. There is still scope for a run at US$15+ share price again (c. x10 prospective EV/ebit valuation). I am remaining long'.
Despite remaining long even I did not anticipate today's excellent announcement:
'...updating expectations for its fourth quarter and full 2015 fiscal year, which will end
And the extent of the upgrade?
now sees revs at $546-555M vs prior guidance of $532-536.
So 3.5% better sales. Add in some operational leverage and numbers are going to have to be hiked by 5%+. I doubt if that US$15 level I talked about above - and at which the shares are now trading - will be a double digit prospective EV/ebit multiple anymore.
Looking at the chart over the last year two aspects are immediately apparent. First the US$15+ share price level has been pretty rarified air in absolute terms...
...and second Smith & Wesson shares have been somewhat volatile. Now the reason for this can be
shown in a pre-update revenue chart from last month: