American Outdoor Brands Stock Continues To Be Overpriced

Core Insights - American Outdoor Brands, Inc. (AOUT) reported disappointing 1Q25 results, with revenues 4% lower than the previous year and guidance for a further decline of 8-9% in 2Q25, despite the expectation of growth in FY25 [2][3][5] Financial Performance - AOUT's revenues in 1Q25 were 4% lower than last year, with the shooting category particularly affected due to high demand post-pandemic and a negative outlook despite 2024 being an election year [3][5] - The outdoor segment performed slightly better, with a decline of 1.7%, driven by innovation in new products [3] - Management has guided for revenues to decline by 8-9% in 2Q25, which is concerning as it is the company's highest-selling quarter [3][5] Guidance and Future Outlook - Despite the negative performance in 1Q25 and the guidance for 2Q25, the company has maintained its annual revenue growth guidance of 2.5%, citing confidence in new product introductions in the second half of the fiscal year [5][6] - The timing of new product launches post the highest-selling season raises questions about the effectiveness of this strategy [5] Valuation Concerns - AOUT is trading at an EV of $93 million, equating to 46x earnings, which is considered extremely high given the company's current financial performance and low margins [6] - To achieve a more favorable valuation, AOUT would need to significantly increase revenues to around $350 million at 6% margins, which appears challenging given current trends [6] Operational Leverage - There is potential operational leverage if the company can exceed a revenue threshold, with management indicating a 30% EBITDA contribution for sales above $200 million [7] - This suggests that faster-than-expected growth could lead to substantial improvements in profitability and stock price [7]