Is it safe to buy American Outdoor stock as shares plunge 13% on weak results?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Dec 14, 2021
  • American Outdoor shares on Monday edged slightly higher, trimming Friday’s post-earnings decline.
  • The stock plunged more than 13% after announcing its FQ2 results Thursday after the close.
  • The company missed analyst expectations on revenue and earnings.

On Monday, American Outdoor Brands Inc. (NASDAQ:AOUT) shares edged slightly higher, trimming Friday’s post-earnings declines. The stock plummeted by more than 13% at the end of last week following the release of its FQ2 results on Thursday after the close. American Outdoor reported revenue and earnings results that missed analyst expectations.

The company posted FQ2 non-GAAP earnings per share of $0.58, missing the consensus for analyst expectations of $0.76. On the other hand, its GAAP EPS of $0.32 was below the average for analyst estimates of $0.52, while revenue for the quarter fell by 10.5% from the same quarter in 2020 to $70.8 million, $11.43 million below the Street forecast.

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Is the decline an opportunity to buy?

From an investment perspective, American Outdoor Brands shares trade at attractive trailing 12-month and forward P/E ratios of 12.96 and 7.50, making it a compelling option for value investors.

On the other hand, analysts expect its earnings per share to grow by 118.70% this year, before increasing further by 7.63% next year. Therefore, the stock could also gain the attention of growth investors.

However, the recent revenue and earnings miss could put those growth prospects in doubt, thereby resulting in a precautionary approach from investors.

Source – TradingView

Technically, American Outdoor shares seem to have recently plummeted to complete a downward breakout from a descending channel formation. As a result, the stock has dropped deep into oversold conditions, creating a perfect opportunity for a rebound.

Therefore, investors could target potential technical rebounds at about $20.32, or higher at $22.59, while $16.59 and $14.16 are crucial support levels.

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