Hmm. Current estimates are based on current share count per the CC. They still have $15 million and I suspect we'll hear something soon about a board approved buyback. Shrink the float another 15%-20% why don't cha. What will the EPS be then?
Agreed. On a down day any green on my screen is good. Just imagine if it was an up day. Looks like $13 is the new resistance. We should push up as we close in on option expiration and shorts start taking year end losses.
Based on their market cap at closing yesterday of about $759 million, with 57.5 million shares that''s $13.20 without the earnings news and forecast. I imagine they will buy at least another million share then it's $13.43 a share. With a P/E of 10 the conservative price is $13-13.50.
A short squeeze couldn't be more perfectly timed than this week with an earnings release. 1) it's that time of the year to take your losses 2) we're about a week away from the gap down from Sandy Hook which means no one will be selling until they are long term bag holders, for their favorable gains rate. To me this signals low supply of the stock and a high demand. As shorts are taking their losses, savvy investors are waiting to take their gains. As far as timing, long term holders could wait until January 1 before they recognize gains, postponing the tax for another year. Meanwhile the pressure of the stock should drift upwards.
Hmm, I'm thinking about waiting...
I think those figures are a little on the high side. Agreed it's still cheap. I don't think investors dropped the stock when the earnings were revised. I think short sellers dropped the price. Funds are in the acquisition mode with SWHC shares. I think those with on the short sale side saw it as weakness in SWHC and still hold to a gun bubble instead of a new trend in sales and demand.
Once SWHC signals either a growth in demand = expansion or acquisition; or confidence in the new trend (dividend) the market should react.
I'm still liking the idea of a 4:1 SWHC to RGR deal. With all the cash on hand either another acquisition or special divi would threaten enough to keep price at a respectable P/E
The more cash SWHC hordes the more tempting a target it becomes. We'll see what news management has in a couple weeks.
A fixed divvy? Say 0.15 per quarter? It would be secure for a minimum of 12 quarters. Should boost pps to $15-20 instantly. It would attract new investors, the funds would be happy and at this level would be a 5.5% yield. However, an increase in interest rates would mean a decline in pps with valuation based on the divvy.
A special divvy? A one time bump that lifts prices temporarily and then kills some of the underlying value. Shareholder get a return, get taxed on the gain and then lose value on the underlying asset.
Acquisition bait? Any price paid would have to take the $125-150 million cash on hand off the actual price paid. The cash could be used to help finance another acquisition, strengthen the acquirer's balance sheet or a dividend to their current shareholders.
Could be due to your poor writing skills. Your topic with the following lead-in sentence sets the topic for your post. To me you're writing "It's a one hit wonder in action. Hand guns, hand guns..." Correct me if you wrote something else. Then you allude to RGR having a more diverse line-up of products.
Too, it speaks greater volumes when referring to present and future actions of the company versus the past. The future of the company is defined by management, therefore if they bungle present and future financials, it impacts pps. Lower pps reflects badly on the management that made those decisions.
If your only argument is a botched business plan from years ago, you have a weak argument and weaker business acumen. Hmm. Also I think the President of the company has changed. I could be wrong.
Just wondering if the acquisition was beneficial to the company if you'd still be bashing the purchase. At the end of the day management was trying to expand the business into a total security solution. It shows ambition/desire for greater things. Agreed, usually when there is a horrible business decision someone is held accountable and terminated.
I may have missed something but aren't hand guns what the market is demanding right now? It seems a little silly to swap out a production line in order to initiate diversification. If I were running the business I would stay the course and capitalize on the current environment. once the market showed signs of softening, I'd transition maintaining production to meet the current demand of my old line and introduce the new line.
I have a feeling handguns is where the market is going. Long guns are more for sport. I see handguns as more for personal protection as well as sport. They could also be seen as a gateway weapon that leads to more sophisticated products. Also I do believe women are the demographic gun companies are looking to capture. There again the theme is personal protection. Kinda hard to sneak a shotgun or rifle in your purse and pistols have less of a kick.
Pretty sure that's what management does. They make educatedguesses.
I may not have been paying attention but wasn't reducing the share count by 6 million baked into this quarter's earning? Wasn't this quarter's earnings forecast based on a 55-56 million float? The extra 15 million should be 1.25million shares out of the float.
I think a portion of them are baked into the numbers, 6 million shares or so. To what you're saying, the extra $15 million the b.o.d was not even a thought during the last cc.
Expansion, growth and new revenue streams. This is what management was trying to achieve by purchasing a fence company. They were trying to move beyond guns, knives, and restraints. I applauded management for the effort, but would chide them for the execution. The past does not effect me, I purchased after those events and am up 4-30%.
What I take away from this board is that I'm supposed to look at the past and the failing of businesses and not invest...Pepsi Clear? Apple TV? Mortgage crisis? Wal-Mart bribery scandal? Movie flops for Disney, Sony? Facebook's failed IPO? Diamond Food's accounting fraud?
The other side of that are companies like Blackberry, Nokia, Kodak, JC Penny. Those businesses are failing due to a failing business=negative earnings per share.
SWHC is in the middle of a gun boom and has continued to increase guidance. With the P/E there is an implied RoR of about 12% compared to 8% for RGR.
Yes and no. If sales are booked months ahead of scheduled production, the impact of a softening market wouldn't be felt for a couple quarters. With that said, a company could slow production to transition to a lower production schedule versus a dramatic drop off. Luckily and unluckily SWHC gives forward guidance so SWHC investors will know before RGR that 6 months or sooner demand will soften.
Also unfortunate is unless the software updates increased production or uses margins as a driver for production, those 8 days are just lost. I'm assuming SWHC is producing at capacity. Meaning 100%. So think of it as unpaid sick days that expire at the end of the year. You can call in sick and get no work done, or you can go to work and lose the amnesty of those sick days.
Again I have to disagree. SWHC has increased their guidance. I expect a decrease in comparable sales only b/c current level are unsustainable. The valuation of SWHC is ridiculously low. There's nothing to attract investors to the stock right now and funds won't stand for that too long. If they institute a dividend then that would cause shorts to cover and investors to buy driving the price up. If they copy RGR, a short position would lose 5% a year, a fall in price would increase this loss.
I think were arguing the same point but I'm going to have to disagree with you on a couple of your points. RGR is fairly valued for a business. RGR is now attractive to two types of investors 1) growth oriented 2) income oriented. Since RGR has expanded their production capacity there's room to grow which warrants a higher P/E, this attracts the growth oriented investor. T-bills yield being all that they are makes dividend yielding stocks more attractive to income investors. With a 3.5% yield RGR's RoR is better than T-bills but makes it less attractive to some growth investors due to short term gains. As interest rates tick up, pps for RGR should come down a little but the growth potential insulates too big of a drop. A P/E of 13.5 with a 3.5% yield is a fair valuation for a company with the risk of a drop off in product demand.
The government contract with the Army should only be $40 million-ish or a 7% bump in annual sales which in itself is insignificant BUT makes it "the standard." Becoming "the standard" is more significant than the contract itself. At that point all agencies will put SWHC in the line up for their contracts and that will spill over into the private sector that wants the standard OR an upgrade from the standard.
3.5 to 1 would be a more fair valuation up front for SWHC shareholders but of no real benefit to RGR. There could be a dilution of EPS or no growth for the new company's shares. A 4:1 would be easier to sale to both party's boards and shareholders. You have to figure if management is doing their job and looking for increasing the shareholder's value the 4:1 is much better all around. Up front it appears the SWHC shareholder is getting %$#&ed. HOWEVER, staying long in the new business would mean a special dividend or stock buy back, this is assuming they'll have $200million cash at this point. This would get the valuation of 3.5:1 for SWHC owners short term with a dividend or 3.5 long term with a buy back. With RGR's 2nd qtr cc comments, with their P/E the divi would make more sense than a buyback. OR the cash could be used for another acquisition. As a side effect, the short squeeze would be happening on both sides on 30% of the floats. SWHC could see valuation as high as $20-22 before settling back to $17-18.
A 4 to 1 SWHC to RGR merger. Let's talk numbers. SWHC are basically throwing off similar sales and margins. So the new company should double in size as far as market cap. The RGR float would increase by 14 million. Compared to RGR's 18 million float, RGR would benefit 25%, SWHC bag holders would benefit 60%=$17-18 price target per share. EPS for the new shares would increase about 4% over RGR's current earnings or to about $5/share. The transfer gives the new shares $10 cash per share backing. RGR would have about $200 million in cash or a special dividend of about $4/ share for the new company with about 75 million left for liquidity and operations. Cute?
I do believe in one of SWHC cc they mentioned this was a slow quarter for their business. I would assume that's why they choose this quarter for annual maintenance. Unless management are total dingbats and choose the busiest time of the year to shutdown, I wouldn't put it past them. Back to school usually means less disposable income for amenities and other un-necessities. School= clothes, supplies, books, laptops... after you spend $300-1500 per kid, it kind drains the middle class of fun money. However, the next quarter heading into winter means: freed up money after you've paid off the bills for the kids, HUNTING season (bow season is in a few weeks), turkey shoots (don't know if that's a #$%$ thing- it's target shooting for prizes), Christmas, and the unfortunate anniversary of Sandy Hook, which may spark gun control debates, giving a boost to sales.
The other things which others have mentioned on this board is that "They don't have what I want." They can't sell it if they don't have the stock. If SWHC is dealing with a 6-9 month backlog, there's going to be downstream implications. Same with a lack of ammo. Why would I buy a gun if there's no ammo for it?
Cabella's promotional sales don't bother me. 1) if CAB over ordered an item, that's on them. If the demand is for handguns and you order rifles/shotguns that's on you. 2) Retail 101 you lose money on your low margin items for sales of high margin items. when I worked retail we'd sale lawn mowers with a 15% mark up, parts had a 30-500% mark up. So look at what the promotion is really doing. While they could have a surplus the ultimate goal is to sale higher margin items that customers have to come back for. 3) The sale is already booked by the manufacturer, I don't care what happens downstream after that. If the retailer wants to discount and lose money on the sales that's all them. Remember, promotions=discounted goods, which means the number of sales could have increased or flat lined.
Is there no one else who tries to be neutral on this board? I'm a long so I'm biased.
Has anyone else notice the PPS has gone nowhere in a year? Last December before Sandy Hook this was trading for 10.80+. That 10.80+ was with less earning meaning it did have a higher P/E. Despite having record sales, record demand and $140 million buyback management has only been able to get this back to even. (Don't worry I opened my position in the high 7s and low 8s) (and I did say $140 million, before the $115 I believe they had a $25 million buyback in place early this year)
Fundamentally, there was nothing wrong with the business. I'd even say operations have improved over that time. Cashflows are great, borrowing terms likewise. Granted the market hates gun manufacturers, what has been done to return value?or expand the business? Fundamentally, the business is doing great but that doesn't equate to gains for the shareholder. I would be livid if I purchased this before the dip.
Then again management could be mocking me and my stupid investment. With $125+ million of cash on hand you would expect management to return that to shareholders. The only reason they wouldn't would be if they thought they could obtain a rate of return on the money greater than the shareholder could. Being in a savings account for Christmas, it could be drawing 1%.... 1% is greater than the stock has performed for most of the year
I don't think RGR has done anything risky or else you wouldn't be here pumping SWHC. You're expecting strong gun demand which I tend to agree with and I think its going to be a multi year occurrence which RGR has/is preparing for. With approximately 1 million permits being applied for a month for the last few months (year?), knowing gun owners purchase more than one, I would guess it's safe to say in 6 months to a year the gun owner will add another one, meaning the application equates to more than one purchase. SWHC has also thrown out the idea of an Army contract which should lead to other government contracts (heck they've added on how may local police departments?) and their being bearish about their future?
If your argument is SWHC is being wise b/c there's going to be a pullback in demand; from an investment standpoint what sense does that make to say the pps should be higher with declining revenues?
And why would they be conservative? Management has maybe a 3 month backlog of orders? They're not allowed to report sales until they're shipped. It would make sense to me to increase the production, book the sales, increase your branding, and eventually pps. With the cost of capital, it would make sense if management sees potential growth in the future to lock in the rates now- like they did with the tender offer.
The last thing any long would want would be a pullback and reversion in the demand of their company's product.