As we settle into October it’s the time of year to sit outside in the crisp fall air, hang out with friends, and maybe even throw a few logs on the outdoor fire stove. And that’s where this week’s stock comes into our idyllic picture, Solo Brands (DTC). 

While most of you are likely familiar with Solo because of their stylishly popular outdoor stoves, the company also sports a line of kayaks, paddle boards, and men’s shorts and swim trunks, with the tongue in cheek name, Chubbies.

The stoves have become a great holiday gift, the Christmas holiday is only 81 days away at this point, and fall and winter outdoor activities have stayed popular even post pandemic. 

Headed into the holidays, Solo trades at a low valuation of 4.6x projected earnings, and only 3.4x free cash flow. The company had to take a goodwill write off in Q2 a year ago, which severely impacted earnings, but with that in the rearview, net income increased 153.9%. 

Gross margins are over 50% at this point, and the sales growth over the past 5 years has been spectacular at over 150%. 

In their recent earnings release, John Merris, CEO expounded on their focus on profitability moving forward, “Our second quarter results reflect our focus on profitability, which resulted in an expansion of our adjusted EBITDA margin to 19.1%. Our omni-channel approach to our business enabled us to lean into the strong momentum we were seeing through our wholesale channel as our brand awareness continues to grow.” 

The company rates an overall B in our POWR Ratings. It rates particularly well on the Growth and Value components, where it has a ranking a hair below 82% of the stocks in our U.S. stocks database. 

I hope you enjoy some time outdoors this fall/winter, maybe by a Solo stove, as the company continues to shine headed into its strongest time of the year.

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DTC shares were trading at $4.82 per share on Thursday afternoon, down $0.08 (-1.63%). Year-to-date, DTC has gained 29.57%, versus a 12.40% rise in the benchmark S&P 500 index during the same period.

About the Author: Jay Soloff

Jay is a former professional market maker who cut his teeth trading on the floor of the CBOE. With more than 20 years of experience trading and investing, his focus is on making professional strategies accessible to everyone, which is exactly what does in his highly profitable POWR Income and POWR Stocks Under $10 investment advisory services. More...

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