American Outdoor Brands (AOUT)

Recreational products manufacturer American Outdoor Brands (NASDAQ:AOUT) missed Wall Street’s revenue expectations in Q2 CY2025, with sales falling 28.7% year on year to $29.7 million. Its non-GAAP loss of $0.26 per share was 4% below analysts’ consensus estimates.

Company Overview

Spun off from Smith and Wesson in 2020, American Outdoor Brands (NASDAQ:AOUT) is an outdoor and recreational products company that offers outdoor and shooting sports products but does not sell firearms themselves.

Leisure products cover a wide range of goods in the consumer discretionary sector. Maintaining a strong brand is key to success, and those who differentiate themselves will enjoy customer loyalty and pricing power while those who don’t may find themselves in precarious positions due to the non-essential nature of their offerings.

Other companies offering shooting sports and outdoor products include Ruger (NYSE:RGR) and private companies O.F. Mossberg & Sons and the Remington Arms Company.

A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, American Outdoor Brands’s sales grew at a weak 2.6% compounded annual growth rate over the last five years. This was below our standards and is a rough starting point for our analysis.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. American Outdoor Brands’s annualized revenue growth of 5% over the last two years is above its five-year trend, but we were still disappointed by the results.

This quarter, American Outdoor Brands missed Wall Street’s estimates and reported a rather uninspiring 28.7% year-on-year revenue decline, generating $29.7 million of revenue.

Looking ahead, sell-side analysts expect revenue to decline by 1.3% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and suggests its products and services will see some demand headwinds.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

American Outdoor Brands’s operating margin has been trending up over the last 12 months, but it still averaged negative 3.8% over the last two years. This is due to its large expense base and inefficient cost structure.

American Outdoor Brands’s operating margin was negative 23% this quarter. The company's consistent lack of profits raise a flag.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

American Outdoor Brands’s full-year EPS dropped 225%, or 34.3% annually, over the last four years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences. Consumer Discretionary companies are particularly exposed to this, and if the tide turns unexpectedly, American Outdoor Brands’s low margin of safety could leave its stock price susceptible to large downswings.

In Q2, American Outdoor Brands reported adjusted EPS of negative $0.26, down from $0.06 in the same quarter last year. This print missed analysts’ estimates. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

American Outdoor Brands has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.8%, lousy for a consumer discretionary business.

American Outdoor Brands burned through $1.99 million of cash in Q2, equivalent to a negative 6.7% margin. The company’s cash burn was similar to its $5.20 million of lost cash in the same quarter last year. These numbers deviate from its longer-term margin, indicating it is a seasonal business that must build up inventory during certain quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

American Outdoor Brands’s five-year average ROIC was negative 1.7%, meaning management lost money while trying to expand the business. Its returns were among the worst in the consumer discretionary sector.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, American Outdoor Brands’s ROIC has decreased over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

American Outdoor Brands reported $17.77 million of cash and $33.31 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $12.56 million of EBITDA over the last 12 months, we view American Outdoor Brands’s 1.2× net-debt-to-EBITDA ratio as safe. We also see its $81,000 of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We struggled to find many positives in these results. Its revenue missed and its EBITDA fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 4.8% to $9.89 immediately after reporting.

Updated: November 25, 2025 at 11:03 PM EST

Before deciding whether to buy American Outdoor Brands or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

American Outdoor Brands doesn’t pass our quality test. For starters, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. On top of that, American Outdoor Brands’s declining EPS over the last four years makes it a less attractive asset to the public markets, and its projected EPS for the next year is lacking.

American Outdoor Brands’s P/E ratio based on the next 12 months is 64.5x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $15.25 on the company (compared to the current share price of $7.09).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.