On Friday, B. Riley adjusted its outlook on Vista Outdoor Inc . (NYSE: NYSE:VSTO), raising the stock's price target from $35.00 to $40.00. The firm upheld its Buy rating on the shares. The upward revision in the price target is based on the anticipation of earnings momentum as the company progresses with its turnaround initiatives.
The analyst at B. Riley cited several factors contributing to the positive outlook, including new leadership and the potential sale of Kinetic, which could attract additional investors.
Vista Outdoor's current trajectory is seen as promising, with conservative estimates suggesting low single-digit sales growth and a 10% adjusted EBITDA margin by the fiscal year 2027. These projections, according to the analyst, still place the company at a discount compared to its peers. The new price target implies an enterprise value approximately 80% higher than the current Revelyst EV, adjusted for the CSG deal.
The company is expected to reach significant milestones in the near future, with key events on the horizon. Shareholders are scheduled to vote on May 16, 2023, and an Analyst Day is set for May 29, 2023.
Additionally, the firm will report its fiscal fourth quarter earnings on May 8, 2023. These events are anticipated to act as catalysts for the stock.
The analyst's confidence in Vista Outdoor is further anchored by the potential sale of the company's Kinetic division, which is seen as an opportunity to bring in incremental buyers. The raised price target to $40.00 reflects a 10.5 times multiple on the firm's fiscal year 2026 Revelyst EBITDA estimate, which underscores the analyst's continued endorsement of the stock with a Buy rating.
InvestingPro Insights
The recent analysis by B. Riley on Vista Outdoor Inc. (NYSE: VSTO) aligns with several insights from InvestingPro. An important InvestingPro Tip notes that Vista's shareholder yield is high, which can be attractive for investors looking for companies that return value to their shareholders. Additionally, analysts have revised their earnings upwards for the upcoming period, indicating a potential earnings momentum that B. Riley also anticipates. This is further supported by the company's strong free cash flow yield as suggested by its valuation.
On the financial metrics side, Vista Outdoor's market capitalization stands at $1.87 billion, with a forward P/E ratio as of Q3 2024 at 10.2, reflecting a more favorable valuation compared to the current negative P/E ratio. The company's revenue for the last twelve months as of Q3 2024 is reported at $2.793 billion, with a gross profit margin of 31.3%, showcasing the company's ability to maintain profitability on its sales. However, it's worth noting the company's revenue has seen a decline of 11.26% during the same period, which may be a point of concern for investors looking at long-term growth prospects.
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