Analyzing Small Cap Stocks: American Outdoor Brands

The TDR Three Takeaways regarding American Outdoor Brands and Small-Cap Stock:

• American Outdoor Brands’ has a strong balance sheet with current assets total $149 million, leading to a working capital of $126 million.
• The company reported a revenue of close to $200 million last year, with a gross margin of 44%.
• The company’s levered free cash flow was nearly $12 million last year. 

American Outdoor Brands (NASDAQ: AOUT), headquartered in Missouri, is operating in the outdoor equipment industry. Trading at approximately $12.02 per share, the company has a market capitalization of $155 million, with 12.9 million shares outstanding. This analysis highlights what we learned on the Small Cap Sunday Podcast last week. 

American Outdoor Brands boasts a solid balance sheet, a cornerstone of its investment appeal. The company’s current assets total $149 million, leading to a working capital of $126 million. This financial liquidity nearly equals its market cap, indicating that investors are effectively buying a business with substantial cash reserves. This financial prudence is crucial for supporting the company’s ambitious research and development (R&D) initiatives.

A defining feature of American Outdoor Brands is its extensive portfolio of 392 patents, which has grown by 30% over the past three years. These patents cover a wide array of products essential for outdoor enthusiasts, from advanced tents to innovative grills. 

The company reported a revenue of close to $200 million last year, with a gross margin of 44%. While revenue growth has been a modest 4.5% over the past three years, American Outdoor Brands is strategically reinvesting profits into R&D. Last year alone, the company invested $6.5 million in R&D and 4.3% of its revenue into capital expenditures. These investments aim to drive future revenue growth and enhance product margins through innovation.

The company’s levered free cash flow was nearly $12 million last year. This figure underscores the company’s ability to generate cash while reinvesting in growth initiatives. The solid cash flow performance validates the company’s business model and reinforces its financial health.

American Outdoor Brands is an intriguing small-cap investment due to its solid financial foundation, strong patent portfolio, and strategic R&D reinvestment. Want to be updated on Cannabis, AI, Small Cap, and Crypto? Subscribe to our Daily Baked in Newsletter!