Valens Equity Weekly Insights - 2022 07 19
Vista Outdoor (VSTO) is consolidating the ammunition market in the U.S. – a market withlarge post-pandemic tailwinds – and spinning out its higher-growth sporting business.
Uniform Accounting highlights that the market is not pricing growth or profitability to be
as strong as we'd expect for such a consolidation and spin-out story, suggesting the
potential for equity upside.
Vista Outdoor is consolidating the ammunition supply in the U.S. With its acquisition of
Remington's ammo business in 2020, it now owns 35% of the whole market. And, with
home protection and hunting both gaining popularity during the pandemic, ammunition
demand has been rising. That's why Vista's Uniform ROA reached an all-time high of 24%
in 2021. The market is pricing returns back to historically low levels, clearly missing the
consolidation story.
VSTO's management is closely aligned to focus on margins and asset efficiency, which
should drive returns higher over the long term.
Management confidence in the Q4 earnings call about growth, scale, and their Better
Together concept suggests management is executing on the company's ongoing strategy.
VSTO
Vista Outdoor is a designer, manufacturer and marketer of consumer products in the outdoor sports and recreation markets. The company's Outdoor Products product lines are action sports, archery/hunting accessories, outdoor cooking, golf, hydration products, optics, shooting accessories and tactical products. The Shooting Sports segment designs, develops, produces, and sources ammunition and firearms for the hunting and sport shooting markets, as well as ammunition for local law enforcement, the U.S. government and international markets. The Shooting Sports product lines include centerfire ammunition, rimfire ammunition, shotshell ammunition, reloading components, and firearms.
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