Smith & Wesson to Change Name

Popular gunmaker wants name to better reflect brands

Author's Avatar
Nov 08, 2016
Article's Main Image

In an effort to be known as more than just a gunmaker, Smith & Wesson (SWHC, Financial) announced Monday it will be changing its name to American Outdoor Brands Corp.

“We believe the name 'American Outdoor Brands Corp.' will better reflect our family of brands, our broad range of product offerings and our plan to continue building upon our portfolio of strong American brands,” CEO James Debney said.

The company clarified that only its holding name will be changed. Its famous firearms will continue to be branded as Smith & Wesson.

Founded in 1852, the company has a long tradition of producing quality firearms. However, the company has expanded into the growing markets for “shooting, hunting and rugged outdoor enthusiasts.”

The name change has been approved by the board of directors and now only faces shareholder approval on Dec. 13. If approved, the new name will be effective on Jan. 1 and trade under the symbol “AOBC.”

Smith & Wesson has a market cap of $1.6 billion with an enterprise value of $1.5 billion. It has a price-earnings (P/E) ratio of 14.3, a forward P/E of 12.7, a price-book (P/B) ratio of 4.6 and a price-sales (P/S) ratio of 2.03.

02May2017143010.png

GuruFocus ranked the company’s financial strength 7 of 10. Its high Piotroski F-Score and Altman Z-Score indicate the company has a healthy financial condition. Its return on invested capital (ROIC) outperforms its weighted average cost of capital (WACC). Its cash-debt ratio of 1.3 exceeds the industry median of 0.4.

GuruFocus ranked Smith & Wesson’s profitability and growth 8 of 10. It has an operating margin of 23.2% and a net margin of 14.3%. The company’s return on equity (ROE) and return on assets (ROA) outperform 94% and 96% of other companies in the global aerospace and defense industry. In addition, its return on capital (ROC) outperforms 94% of its competitors.

Jeremy Grantham (Trades, Portfolio) is the company’s largest shareholder among the gurus with 1.5% of outstanding shares, which is 0.1% of his total assets managed. Joel Greenblatt (Trades, Portfolio), Chuck Royce (Trades, Portfolio), Steven Cohen (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) also hold positions in Smith & Wesson.

The DCF Calculator gives the stock a fair value of $21.19; it was trading at $28.55 on Tuesday.

Disclosure: I do not own stock in the company mentioned in the article.

Start a free 7-day trial of Premium Membership to GuruFocus.