The resumption of recreational activities, including shooting and hunting, with rapid COVID-19 immunization, has fueled increased demand for guns in the United States. In fact, with many consumers stocking firearms in anticipation of tighter gun regulations under the Biden administration, gun sales have been soaring this year.
According to an opinion poll conducted by a research center at University of Chicago, 39% of American households now own guns, up from 32% in 2016. Furthermore, as sporting activities are gathering momentum with the easing of social distance restrictions, many more people may join the gun purchase trend , pushing up gun sales in the coming months.
Therefore, gun companies Vista Outdoor Inc. (VSTO) and Big 5 Sporting Goods Corporation (BGFV) should see heightened demand for their products and generate substantial revenues this year and beyond. So, we think these two stocks could be solid bets now.
Vista Outdoor, Inc. (VSTO)
VSTO is a consumer product designer, producer, and marketer in the outdoor sports and recreation industry that is based in Clearfield, Utah. Shooting Sports and Outdoor Products are the two segments in which the company operates. It serves a widely varied consumer base that includes outdoor enthusiasts, hunters and recreational shooters, athletes, law enforcement and military professionals. In May, the company acquired e-Bike brand QuietKat and female apparel brand Venor to diversify its powerhouse brands and boost its portfolio.
During its fiscal year ended March 31, 2021, VSTO's net sales increased 26.8% year-over-year to $2.23 billion. Its net income came in at $266.01 million for the period, compared to a $155.08 million net loss in 2020. The company’s EPS was $4.44, compared to a $2.68 loss per share in the prior-year period. Also, the company’s gross profit surged 76.4% year-over-year to $632.96 million over this period.
VSTO’s company's EPS is expected to grow 3.3% year-over-year to $3.71 next year. Analysts expect its revenue to increase 10.8% year-over-year to $2.46 billion in its fiscal year 2022. VSTO's stock has gained 181.2% over the past year and 68.9% year-to-date.
VSTO's POWR Ratings reflect this promising outlook. The company has an overall B rating , which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
VSTO is also rated a B grade for Sentiment, Value, and Quality. Within the A-rated Athletics & Recreation industry, it is ranked #7 of 33 stocks.
To see additional POWR Ratings for Momentum, Growth, and Stability for VSTO, click here.
Big 5 Sporting Goods Corporation (BGFV)
BGFV operates as a sporting goods retailer and offers a variety of products, such as athletic shoes, apparel, accessories and others, through its stores and e-commerce platform. The company operated 430 stores in 11 states as of April 4, 2021. BGFV is based in El Segundo, Calif.
During its first fiscal quarter, ended April 4, 2021, BGFV's net sales increased 25.3% year-over-year to $272.81 million. The company’s net income came in at $21.55 million, compared to a $4.61 net loss in the first quarter of 2020, while its EPS came in at $0.96 compared to a $0.22 loss per share in the prior-year period. Its adjusted EBITDA amounted to $30.30 million compared to a negative $2.21 million adjusted EBITDA in the first quarter of 2020.
A $3.38 consensus EPS estimate for the current year represents a 37.4% improvement year-over-year. The $1.13 billion consensus revenue estimate for the current year represents an 8.10% increase from the same period last year. The stock has gained 787.8% over the past year and 127.9% over the past nine months.
It is no surprise that BGFV has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Value, Momentum, and Quality. In the Athletics & Recreation , it is ranked #2 of 33 stocks.
In addition to the POWR Ratings grades we have just highlighted, one can see the BGFV ratings for Growth, Stability, and Sentiment here.
VSTO shares were trading at $40.58 per share on Thursday morning, up $0.46 (+1.15%). Year-to-date, VSTO has gained 70.79%, versus a 17.12% 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.
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