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Nautilus Stock Heads Higher After Posting Hottest Growth Ever

By Jon Quast – Aug 11, 2020 at 12:11PM

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After more than 20 years as a public company, is Nautilus finally hitting its stride?

What happened

Shares of at-home fitness company Nautilus (NLS 1.80%) headed higher on Tuesday, after the company posted red-hot revenue growth for the second quarter of 2020. In the earnings call, CEO Jim Barr called it "our best year-over-year growth since becoming a public company."

Considering Nautilus went public more than two decades ago, this was a big statement. Not surprisingly, Nautilus stock had surged 14% higher as of 11:45 a.m. EDT, hitting fresh 52-week highs.

NLS Chart

NLS data by YCharts

So what

In Q2, Nautilus increased net sales 94% year over year to $114 million. The company was weighed down a bit by supply chain constraints, having resorted to expedited shipping and extra shifts at distribution centers to handle demand. This hurt margins some, but it was worth it to deliver the best jump in quarterly sales since going public.

Nautilus recorded a quarterly operating loss of $7.1 million. This was significantly improved from its operating loss of $85.4 million in the second quarter of 2019, yet it might still be disappointing for shareholders. However, investors should consider the company recorded a noncash charge of $29 million related to its planned sale of Octane Fitness. Otherwise, it would have reported an operating profit.

A rack of barbells is displayed in a gym setting.

With gyms closed or limited, many turned to Nautilus to enable at-home exercise routines. Image source: Getty Images.

Now what

Nautilus stock has recognized incredible gains over the past few months, and investors are right to be excited about the improvements to the business. But here's some perspective: Nautilus' Q2 sales volume was the same as that of the fourth quarter of 2019. The second quarter is typically a very slow quarter. Therefore, it was an easy comparison and makes the Q2 sales results appear more impressive than they actually are. 

Furthermore, Barr attempted to subdue investors' expectations by calling the positive effect of COVID-19 on Nautilus' business "undeniably temporary." This quarter helps the company pursue its goals in the short term. But it has to keep investing heavily in digital if it's going to keep pace with its exercise-at-home peers going forward.

In other words, this was a good quarter for Nautilus, but (as always) investors need to extend their vision to the long term when choosing stocks.


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

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