Byrna (BYRN)

Non-lethal weapons company Byrna (NASDAQ:BYRN) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 57.3% year on year to $26.19 million. Its GAAP profit of $0.07 per share was in line with analysts’ consensus estimates.

Company Overview

Providing civilians with tools to disable, disarm, and deter would-be assailants, Byrna (NASDAQ:BYRN) is a provider of non-lethal weapons.

Many law enforcement suppliers companies require licensing and clearance to manufacture products such as firearms. These companies can enjoy long-term contracts with law enforcement and corrections bodies, leading to more predictable revenue. It is still unclear how the recent focus on excessive force and police accountability will impact longer-term demand. On the one hand, lethal force products could become less popular. On the other hand, products such as body cams that aid in the transparency of policing could become standard. Generally, the sector’s fate will also ebb and flow with state or local budgets, and there is high reputational risk, as one mishap or bad headline can change a company’s fortunes.

Byrna’s peers and competitors include Axon (NASDAQ:AXON) and Microvast Holdings (NASDAQ:MVST).

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Luckily, Byrna’s sales grew at an incredible 146% compounded annual growth rate over the last five years. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Byrna’s annualized revenue growth of 40.2% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. We note Byrna isn’t alone in its success as the Law Enforcement Suppliers industry experienced a boom, with many similar businesses also posting double-digit growth.

This quarter, Byrna’s year-on-year revenue growth of 57.3% was magnificent, and its $26.19 million of revenue was in line with Wall Street’s estimates.

We also like to judge companies based on their projected revenue growth, but not enough Wall Street analysts cover the company for it to have reliable consensus estimates. This signals Byrna could be a hidden gem because it doesn’t get attention from professional brokers.

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.

Although Byrna was profitable this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 4.9% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out.

On the plus side, Byrna’s operating margin rose by 19 percentage points over the last five years, as its sales growth gave it operating leverage. Still, it will take much more for the company to show consistent profitability.

In Q1, Byrna generated an operating profit margin of 6.5%, up 7.5 percentage points year on year. This increase was a welcome development and shows it was more efficient.

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.

Byrna’s full-year EPS flipped from negative to positive over the last five years. This is a good sign and shows it’s at an inflection point.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Byrna, its two-year annual EPS growth of 99.2% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q1, Byrna reported EPS at $0.07, up from $0 in the same quarter last year. This print was close to analysts’ estimates. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data. This signals Byrna could be a hidden gem because it doesn’t have much coverage among professional brokers.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Byrna’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 3.9%, meaning it lit $3.88 of cash on fire for every $100 in revenue.

Taking a step back, we can see that Byrna’s margin dropped by 3.2 percentage points during that time. If the trend continues, it could signal it’s in the middle of an investment cycle.

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).

Although Byrna has shown solid business quality lately, it struggled to grow profitably in the past. Its five-year average ROIC was negative 9.4%, meaning management lost money while trying to expand the business.

Businesses that maintain a cash surplus face reduced bankruptcy risk.

Byrna is a well-capitalized company with $19.29 million of cash and $2.54 million of debt on its balance sheet. This $16.75 million net cash position is 4.5% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We were impressed by how significantly Byrna blew past analysts’ EBITDA expectations this quarter. Overall, we think this was a decent quarter. The stock traded up 2.5% to $17 immediately following the results.

Updated: May 21, 2025 at 11:13 PM EDT

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Byrna.

Byrna is an amazing business ranking highly on our list. For starters, its revenue growth was exceptional over the last five years. And while its relatively low ROIC suggests management has struggled to find compelling investment opportunities, its rising cash profitability gives it more optionality. On top of that, Byrna’s expanding operating margin shows the business has become more efficient.

Byrna’s EV-to-EBITDA ratio based on the next 12 months is 37.3x. Looking across the spectrum of industrials companies today, Byrna’s fundamentals shine bright. We like the stock at this price.

Wall Street analysts have a consensus one-year price target of $35.63 on the company (compared to the current share price of $23.50), implying they see 51.6% upside in buying Byrna in the short term.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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