Every day, Wall Street analysts upgrade some stocks, downgrade others, and "initiate coverage" on a few more. But do these analysts even know what they're talking about? Today, we're taking one high-profile Wall Street pick and putting it under the microscope...

2017 has not been kind to investors in Vista Outdoor (NYSE:VSTO) stock.

The bad news began rolling out in January, when management at the outdoor sporting goods supplier warned that its hunting and shooting accessories unit would be recording a "material, non-cash intangible asset impairment charge" in its fiscal third quarter. The news got worse in February, when the size of the charge became clear -- $449 million -- resulting in a $6.44 share loss for the quarter, and a series of shareholder lawsuits.

Result: Vista Outdoor stock is down 45% so far this year. And yet, such a steep decline in stock price has one analyst thinking that now is a good time to buy Vista Outdoor. Here are three things you need to know about that.

Bullet in flight.

How cheap is Vista Outdoor stock and how far will it fly? Image source: Federal Premium Ammunition.

1. An unusual suspect (for a buy rating)

As reported on StreetInsider.com this morning, tiny Cambridge, Massachusetts-based equity researcher Off Wall Street initiated Vista Outdoor with a buy rating and a $29 price target. Granted, not a lot of people know a lot about Off Wall Street (OWS). The name's so unfamiliar, in fact, that we're not even 100% certain what it's calling its rating -- TheFly.com reported the same initiation, but said that OWS rated Vista stock "Long."

But here's what we do know: According to its own website, OWS likes to be known as "the premier provider of sell and sell short recommendations," offering up twice as many as buy recs.The fact that it's making headlines today with a buy recommendation on Vista Outdoor, therefore, is remarkable.

2. What's to like about Vista Outdoor?

So what was it that convinced Off Wall Street to change its spots? You may be shocked to hear this but...it's the same side of Vista Outdoor that sparked the sell-off in February: Shooting sports!

According to OWS, Vista Outdoor may not be selling a lot of firearms lately (and judging from its earnings report, neither is its rival American Outdoor Brands (NASDAQ:AOBC)). But this is a function of how much demand was pulled forward during the run-up to the 2016 presidential election, and how many firearms were sold in that period. And as OWS sees it, the fact that there are so many guns floating around out there right now, means there's a big "installed base for modern sporting rifles," which tend to consume ammunition faster than handguns do during target practice.

3. Why that's good news for Vista Outdoor

As Off Wall Street sees it, this is good news for Vista Outdoor. For while all of Vista, American Outdoor Brands, and Sturm, Ruger (NYSE:RGR) sell firearms, Vista is the one stock in this group that also derives "a large percentage of overall sales" from the sale of ammunition to feed those firearms. (In ammunition, the company's primary competitors are neither American Outdoor nor Sturm, Ruger, but rather Olin Corporation's (NYSE:OLN) Winchester brand and privately held Remington Arms.)

Vista does not break out precisely how much of its sales come from ammunition specifically, but it does state repeatedly in its 10-K filing with the SEC that the shooting sports business accounts for 62% of its sales -- and notes, too, that its "Federal Premium ammunition brand has a No. 1 market share in ammunition."

So it's probably safe to assume the amount of revenue Vista derives from ammunition sales is "a lot."

The most important thing: Valuation

A lot, yes. But is it enough to make Vista Outdoor stock a buy? I actually don't think so, and I'll tell you why not.

Off Wall Street argues that Vista's ammunition sales, and the "strong" free cash flow they provide, are what makes Vista Outdoor stock a buy. And yes, its Q3 loss notwithstanding, Vista does generate a lot of cash. S&P Global Market Intelligence figures show that Vista generated more than $120 million in positive free cash flow over the past 12 months -- more than 10% of its current $1.2 billion market capitalization.

Problem is, while Vista generates a lot of cash, it also has a lot of debt that it needs to pay off. Net of debt, Vista's enterprise value is roughly twice the company's market capitalization -- $2.3 billion. Thus, the stock's enterprise value-to-free-cash-flow ratio today is about 19.2.

Relative to analysts' projected 16% long-term growth rate, this suggests to me that OWS is half right: The stock is not egregiously expensive, but neither is it cheap. I admit -- like OWS, I'm tempted to buy Vista Outdoor stock at these levels. But given my druthers, I think I'd rather own American Outdoor stock at its enterprise value of 7.1 times free cash flow, with a projected 14% growth rate, or Sturm, Ruger, with its 12.7 EV/FCF ratio and projected 17% growth rate for next year, before buying Vista Outdoor stock. (I'd of course prefer a longer projection for Ruger, but this is the best analysts are giving us right now.)

Because it you're going to buy cheap, you might as well buy the cheapest stocks around.

Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.