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Why American Outdoor Brands Corporation Gained 11% in September

By Demitri Kalogeropoulos - Oct 8, 2018 at 10:30AM

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Sales growth, plus profitability gains, drove investor optimism higher last month.

What happened

American Outdoor Brands (SWBI 2.97%) stock beat the market last month by gaining 11%, compared with a 0.4% increase in the S&P 500, according to data provided by S&P Global Market Intelligence.

^SPX Chart

^SPX data by YCharts.

The rally pushed shares back into positive territory for the year, and the firearms retailer is currently up 14%, compared with a 7% gain in the S&P 500.

So what

Investors pushed shares higher in response to a surprisingly strong earnings report by the Smith & Wesson owner. Sales improved 8% in the fiscal first quarter, the company said in late August, and those gains came despite a reduced reliance on price cuts. As a result, gross profit margin jumped to 38% of sales from 32% in the year-ago period.

Now what

American Outdoor Brands' latest product releases are finding traction with firearm enthusiasts, and that success bodes well for growth, given the rising demand trend across the industry.

The retailer's sales and profits are subject to big swings that are driven by political and regulatory news, though. Investors should take that elevated volatility into account when considering whether to buy into the firearm giant's recent rally.

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Stocks Mentioned

Smith & Wesson Brands, Inc. Stock Quote
Smith & Wesson Brands, Inc.
SWBI
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