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NAT’L – INDUSTRY INSIDER – Vista Outdoor: Shooting Out The Lights

First, this article may not be for everyone. There are plenty of differing opinions on firearms and ammunition, and Vista Outdoor (NYSE:VSTO) makes a LOT of ammunition. In fact, the Shooting Sports segment of its business is roughly 65% of revenue and gross profit. In spite of the perceived dark side of firearms, this is also an industry that is seeing incredible growth and has some runway to it. So while I would rather stay away from hot-button issues, I cannot avoid the fact that Vista Outdoor is a company that is incredibly profitable and is at least a 2-6 month buy for those who would like to participate in that profit. My recent article on Sturm, Ruger (NYSE:RGR) points out many reasons why firearms can keep selling. Vista Outdoor, however, makes 65% of its money on items that are consumable that are used with firearms. That is a large area to profit from, as all of the recent sales in firearms lead to more sales in ammunition… and ammunition is usually used once and then needs to be purchased again. In terms of equals in the U.S., Vista Outdoor does not really have any. Its business is mostly ammunition, with a mixture of firearm accessories and outdoor recreational equipment. As mentioned above, the main portion of Vista’s business comes from ammunition and firearm accessories. This can be problematic at times, but in today’s sense of political unrest, many folks look to feel safer… and whether you like it or not, they feel safer when they can protect themselves. Companies like Sturm, Ruger and Smith & Wesson (NASDAQ:SWBI) are pretty much pure plays on firearms, which tend to last decades. The only other public or private companies with much in terms of sales that are housed in the U.S. would be Olin Corporation (NYSE:OLN) and Remington. Olin is a company that owns Winchester ammunition; however, its main business is chlor-alkali, and it gets roughly 10-15% of its profit from ammunition – so it is not as effective in capturing gains in the industry. The other company mentioned, Remington, was recently purchased out of bankruptcy by Vista Outdoor… for the price of $81.4M. (Remington sales were roughly $200M in 2019 – a down year – so it’s needless to say that Vista got a great deal!). Vista used $51M cash on hand and $30M from its revolving credit line for this purchase.  [full article]

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