I had a dream two nights ago. I wont go into too much detail, except I saw my SWHC position at 18k which would give good ol Smith a share price a little over $20 dollars.
I never contemplated too much thought into the whole M&A route or even considered to entertain the idea seriously. Without this scenario Smith & Wesson is a great cash generating company with strong fundamentals, this I've always believed with 3Q as solid evidence.
I have no clue as to why I would dream about this stock when I'm on edge and sweating bullets over my other holding, but my gut is saying hold and see what happens.
Yes. Very true. sWHC shows up as a target due to 1) very little debt, 2) high cash balances, 3) strong cashflow and margins, 4) undervalued now at 4x EBITDA - should be twice that.
I would not doubt if they are a target. If SWHC wants to stay as is, they will need to launch another buyback.
By the way, a takeout premium would be off of fair value which is considerably higher than today's price. That could be the play of a group that wants to take some or all of Freedom Group and add swhc to it. it serves to add to the pressure on swhc management to grow by acquisition or get acquired. Eat or be eaten.
Not private equity. Too much heat from the pension funds that provide their capital. It would have to be a wealthy individual who just wants to make money. If that hypocrite buffet followed his parameters-great brand, growth, market share...he would already own this company.
Yes, they could buy it for very little outlay. They could lever up assets and use the cash. The return on invested funds would be good, not great, but they would be building a core. Same model Freedom Group had before they chickened out.