LC Posted June 27, 2013 Share Posted June 27, 2013 Has SWHC run across anyone else's eyes recently? I read through their annual yesterday and looked at their history: Excluding 2013, Over the last 10 yrs they generated about 200m of cash and spent all of it and more on Capex and acquisitions. The 'more' came from both debt and equity issuances. So not a good start. However the last few years have been quite good. They've entered the polymer gun market with the MP series, which is very popular in the "concealed carry" market. In 2012 and 2013 they have been capital constrained and were not able to meet demand. Backlog was over 400m for those two years. Based on some random YouTube reviews of their best selling gun the MP Shield, it gets very good reviews but people are having a hard time getting a hold of it. MSRP is 400 and it is selling in the 700 range. The way I see it, their long term history of profitability is so-so. Recently, gun sales have boomed due to fears from the recession but more likely Pres. Obama giving speeches about tighter gun regulation. Financially, they offered to tender $20m of shares at $10/share. They refinanced $50m of 9.5% debt into $100m of 5.875% debt. So for $640m, you're getting a company with $100m in cash, sales next year probably in the 550-650 range, which all else equal looks to me like about 100-125m in owner earnings. Even if the company reverts to its historical norm, which isn't great but isn't a failing business, either...you're still getting a great brand name on top. Not sure if I want to buy, though! Link to comment Share on other sites More sharing options...
Hubris Posted July 3, 2013 Share Posted July 3, 2013 Came up on one of my "magic formula" screens. I've had a look through the annual and their closing a plant down to lower costs seems like a small turnaround. They also had a small defense business which they had acquired back in 2008 I think and have recently divested. To me it seems the turn around has already happened however you might be seeing some eleveated revenues which is very cyclical if you look at gun sales and trends. I had a few other comps pop up as well. Link to comment Share on other sites More sharing options...
LC Posted July 3, 2013 Author Share Posted July 3, 2013 Came up on one of my "magic formula" screens. I've had a look through the annual and their closing a plant down to lower costs seems like a small turnaround. They also had a small defense business which they had acquired back in 2008 I think and have recently divested. To me it seems the turn around has already happened however you might be seeing some eleveated revenues which is very cyclical if you look at gun sales and trends. I had a few other comps pop up as well. Yes this was my reason for not investing. I couldn't determine if elevated sales were cyclical or not. While I concede that the MP brand is doing very well (great reviews from users on YouTube, 3 month customer backlog at retailers, selling above MSRP due to unmet demand) and I am sure polymer guns are better margin products, I don't know if sales will drop off. Management says their backlog is growing, they don't have enough capacity to meet orders, etc. and I believe them. I just don't know if the same level of demand will exist in 3 years. Link to comment Share on other sites More sharing options...
rkbabang Posted July 3, 2013 Share Posted July 3, 2013 Came up on one of my "magic formula" screens. I've had a look through the annual and their closing a plant down to lower costs seems like a small turnaround. They also had a small defense business which they had acquired back in 2008 I think and have recently divested. To me it seems the turn around has already happened however you might be seeing some eleveated revenues which is very cyclical if you look at gun sales and trends. I had a few other comps pop up as well. Yes this was my reason for not investing. I couldn't determine if elevated sales were cyclical or not. While I concede that the MP brand is doing very well (great reviews from users on YouTube, 3 month customer backlog at retailers, selling above MSRP due to unmet demand) and I am sure polymer guns are better margin products, I don't know if sales will drop off. Management says their backlog is growing, they don't have enough capacity to meet orders, etc. and I believe them. I just don't know if the same level of demand will exist in 3 years. The demand in this industry is definitely tied to politics in a big way. Gun sales soared during the Clinton years, then leveled off or even dropped under Bush and are now hitting the stratosphere again under Obama. If a pro-gun president takes office in 2016 I wouldn't want to be holding SWHC. But it could be an interesting stock to own for the short term, especially if any new legislation is proposed. I don't own any S&W products (partly because of hard feelings over their past actions even if it was a long time ago), but I do know people who love the M&P series, and of course their revolvers are classics. Link to comment Share on other sites More sharing options...
LC Posted July 24, 2013 Author Share Posted July 24, 2013 Tender offer results in: http://www.sec.gov/Archives/edgar/data/1092796/000119312513299799/d572798dex99a5c.htm -Fixed price tender @ $11/sh, max of $75m authorized -Tendered: 1,431,747 shares of its common stock at a total cost to the company of approximately $15.7 million (2.2% of outstanding) IMHO most shareholders think the stock price of undervalued. However I am not sure there is enough margin of safety. Link to comment Share on other sites More sharing options...
blainehodder Posted November 22, 2013 Share Posted November 22, 2013 SWHC/RGR valuation spread is getting pretty outrageous. While RGR is the company to own in this space... SWHC could be the company to rent at these levels. I'm shifting into SWHC. Link to comment Share on other sites More sharing options...
LowIQinvestor Posted July 29, 2014 Share Posted July 29, 2014 Have you taken a look at SWHC lately, after they reported 2014 earnings? Trading at 10 PE and starting to buy-back shares more aggressively. http://ir.smith-wesson.com/phoenix.zhtml?c=90977&p=irol-newsArticle&ID=1941268&highlight= I'm intrigued.. Link to comment Share on other sites More sharing options...
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