What happened

Shares of Traeger (COOK 1.16%) were up 39% as of 10:40 a.m. ET on Thursday after the outdoor cooking supplier reported better-than-expected earnings results for the second quarter.

Revenue was still down 14% year over year, but the $171.5 million was higher than the previous quarter's $153 million. The company also reported improving profitability, with management expecting a return to year-over-year revenue growth in the next few quarters.

So what

The 16% drop in sales in 2022 sent the stock crashing to new lows. After more than doubling year to date, the stock could still be considered relatively cheap at a price-to-sales ratio of 1.17, which is half the market average.

Traeger was a fast-growing business through 2021. It's the leading maker of wood-pellet grills. Revenue doubled between 2019 and 2021, but management believes it's on the verge of returning to growth heading into next year. 

Demand was still under pressure as retailers focused on lowering inventory amid weak consumer demand. Grill revenue was down nearly 21%, with consumables revenue down 17% year over year. This was partly offset by an 7.4% increase in accessories, driven by higher selling prices and strong sales of smart thermometers.

Most notable was a significant improvement on the bottom line. The net loss of $32.9 million was much improved over the year-ago quarter's loss of $133 million, setting up a potential return for profitable growth next year.

Now what

Management raised its full-year revenue estimates and expects a return to revenue growth in the second half of 2023.  

The market for outdoor grills is projected to grow in the mid-single-digit range through 2032. Traeger's previous record of growth and its leading brand suggest it should be able to gain market share and grow much faster than the market.