Should You Buy the Dip in Vista Outdoor?

NYSE: VSTO | Vista Outdoor Inc. News, Ratings, and Charts

VSTO – Shares of outdoor recreation products company Vista Outdoor (VSTO) have rallied 37.9% in price over the past nine months on the back of robust demand and its introduction of new, innovative products. But given that the stock suffered a significant price dip recently, is it worth betting on the stock now? Let’s find out. Read on.

Vista Outdoor Inc. (VSTO) is an Anoka, Minn.-based global leader in designing, producing, and marketing outdoor recreation and shooting sports equipment. Its segments serve the outdoor sports and recreation sectors with a varied portfolio of well-known brands that provide consumers a diverse choice of performance-driven, high-quality, and innovative products.

The stock has gained 37.9% in price over the past nine months and 13.6% over the past three months. In addition, closing yesterday’s trading session at $37.83, the stock is currently trading 28.2% below its 52-week high of $52.69, which it hit on Jan.5, 2021.

With its recent purchase of Stone Glacier, its sixth acquisition in less than 18 months, VSTO aims to construct a robust and broad portfolio while increasing the total addressable market across multiple outdoor recreation categories. In addition, VSTO has announced a new $200 million share repurchase program, demonstrating its strong cash flow generating capability.

Here is what could shape VSTO’s performance in the near term:

Strategic Acquisition

Last December, VSTO acquired Stone Glacier; a premium company focused on ultralightweight, performance hunting gear suited for outdoor use. With the addition of Stone Glacier to the company’s portfolio of outdoor products and shooting sports brands, it will be able to enter the packs, camping equipment, and technical apparel categories with a fast-growing brand and provide a foundation to leverage camping category synergies.

Robust Financials

During the third quarter, ended Dec.26, 2021, VSTO’s net sales increased 38.3% year-over-year to $794.65 million. Its gross profit increased 72.4% year-over-year to $281.47 million. And the company’s net income grew 49.8% from its year-ago value to $118.13 million, while its EPS grew 52.7% from the prior-year quarter to $2.

Strong Profitability

VSTO’s 15.1% trailing-12-months net income margin is 129.9% higher than the 6.6% industry average. Also, its ROC, EBITDA margin, and ROA are 226.1%, 82.7%, and 203.5% higher than their respective industry averages. Furthermore, its $257.52 million in cash from operations is 40.2% higher than the $183.7 million industry average.

Stable Growth Prospects

The Street expects VSTO’s revenues and EPS to rise 34.6% and 121%, respectively, year-over-year to $3 billion and $8.09 in fiscal 2022. In addition, VSTO’s EPS is expected to rise at a 3.1% CAGR over the next five years. Furthermore, the company has an impressive earnings surprise history; it topped the Street’s EPS estimates in each of the trailing four quarters.

Discounted Valuation

In terms of forward Non-GAAP P/E, the stock is currently trading at 4.87x, which is 66.1% lower than the 14.38x industry average. Also, its 0.97x forward EV/Sales is 27.7% lower than the 1.34x industry average. And VSTO’s 1.89x forward Price/Book is 39.9% lower than the 3.14x industry average.

Consensus Rating and Price Target Indicate Potential Upside

All four Wall Street analysts that rated VSTO rated it Buy. The 12-month median price target of $66.25 indicates a 75.1% potential upside. The price targets range from a low of $57.00 to a high of $78.00.

POWR Ratings Reflect Solid Prospects

VSTO has an overall B grade, which equates to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. VSTO has an A grade for Value and a B for Quality. The company’s lower-than-industry multiples are in sync with the Value grade. In addition, VSTO’s solid earnings and revenue growth potential are consistent with the Quality grade.

Among the 35 stocks in the B-rated Athletics & Recreation industry, VSTO is ranked #5.

Beyond what I stated above, we have graded VSTO for Growth, Sentiment, Stability, and Momentum. Get all VSTO ratings here.

Bottom Line

VSTO is a leading player in the outdoor sports and recreations market with an impressive brand portfolio and an international market presence. So, considering its solid fundamentals and impressive growth outlook, we think the stock could be an excellent addition to one’s portfolio at the current price level.

How Does Vista Outdoor Inc. (VSTO) Stack Up Against its Peers?

VSTO has an overall POWR Rating of B, which equates to a Buy rating.  Check out these other stocks within the Athletics & Recreation industry with B (Buy) ratings: Academy Sports & Outdoors Inc. (ASO), Columbia Sportswear Company (COLM), and MarineMax Inc. (HZO).

Want More Great Investing Ideas?

100 Best Stocks for 2022

3 Stocks to DOUBLE This Year

2022 Stock Market Outlook

9 “Must Own” Growth Stocks

VSTO shares were trading at $37.59 per share on Friday morning, down $0.24 (-0.63%). Year-to-date, VSTO has declined -18.41%, versus a -5.87% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
VSTOGet RatingGet RatingGet Rating
ASOGet RatingGet RatingGet Rating
COLMGet RatingGet RatingGet Rating
HZOGet RatingGet RatingGet Rating

Most Popular Stories on

Christmas in July for Stock Investors!

Yes, the S&P 500 (SPY) made new highs again on Tuesday. But really it is the 6X gain for the Russell 2000 small cap index Tuesday...and 12% gain this past week that is grabbing everyone’s attention. Let’s discuss why this is happening...if it will continue...and my 12 favorite stocks to rally in the weeks ahead. Read on for more...

3 Promising Tech Stocks Under $40 for Long-Term Investment

The increasing demand for technology services worldwide fuels the tech industry. Amid this backdrop, it could be wise to buy under $40 tech stocks, such as HP Inc. (HPQ), Box, Inc. (BOX), and Teradata Corp (TDC), for long-term investment. Continue reading…

3 MedTech Stocks to Add to Your Portfolio in July

The MedTech sector’s promising future is driven by technological advances, unceasing demand for medical treatments due to an aging population, and increasing global incidence of diseases. To that end, strong MedTech stocks such as Tactile Systems Technology (TCMD), Electromed (ELMD), and Embecta (EMBC) could be wise portfolio additions in July. Read more...

3 Bank Stocks Benefiting From High Interest Rates

Amid global economic uncertainties, major U.S. banks like JPMorgan (JPM), Wells Fargo & Company (WFC), and PNC Financial Services (PNC) have defied expectations with strong revenue and earnings reports for the second quarter. Considering their robust performance, investing in these stocks could offer stable returns to your portfolio. Read more…

Investor Alert: Load Up on Small Cap Stocks!

Large caps time in the sun is now over and thus no shock that the S&P 500 (SPY) pulled back from recent highs. It is time for small caps to shine which was clear in their nearly 4% gain Thursday even as the Magnificent 7 was bathed in red. Why is this happening? What comes next? And what are the best stocks to own now? The answers to all that and more are shared in the commentary below...

Read More Stories

More Vista Outdoor Inc. (VSTO) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All VSTO News