Acushnet (GOLF)

Golf equipment and apparel company Acushnet (NYSE:GOLF) reported Q1 CY2025 results topping the market’s revenue expectations, but sales were flat year on year at $703.4 million. Its GAAP profit of $1.62 per share was 22.9% above analysts’ consensus estimates.

Company Overview

Producer of the acclaimed Titleist Pro V1 golf ball, Acushnet (NYSE:GOLF) is a design and manufacturing company specializing in performance-driven golf products.

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.

Competitors in the golf equipment market include Topgolf Callaway (NYSE:MODG), Mizuno (TYO:8022), Nike (NYSE:NKE), Johnson Outdoors (NASDAQ:JOUT), and private companies TaylorMade, Ping, and Srixron.

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. Over the last five years, Acushnet grew its sales at a sluggish 8.2% compounded annual growth rate. This was below our standard for the consumer discretionary sector and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Acushnet’s recent performance shows its demand has slowed as its annualized revenue growth of 2.2% over the last two years was below its five-year trend.

We can dig further into the company’s revenue dynamics by analyzing its three most important segments: Titleist Balls, Titleist Clubs, and FootJoy, which are 30.3%, 29.5%, and 25.4% of revenue. Over the last two years, Acushnet’s Titleist Balls (golf balls) and Titleist Clubs (golf clubs) revenues averaged year-on-year growth of 5.6% and 7.3% while its FootJoy revenue (apparel) averaged 4.5% declines.

This quarter, Acushnet’s $703.4 million of revenue was flat year on year but beat Wall Street’s estimates by 0.7%.

Looking ahead, sell-side analysts expect revenue to grow 1% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and implies its products and services will face some demand challenges.

Acushnet’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 11.9% over the last two years. This profitability was higher than the broader consumer discretionary sector, showing it did a decent job managing its expenses.

This quarter, Acushnet generated an operating profit margin of 16.3%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Acushnet’s EPS grew at a spectacular 23.4% compounded annual growth rate over the last five years, higher than its 8.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

In Q1, Acushnet reported EPS at $1.62, up from $1.35 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Acushnet’s full-year EPS of $3.60 to grow 2.9%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Acushnet has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 8.9%, subpar for a consumer discretionary business.

Acushnet burned through $131.5 million of cash in Q1, equivalent to a negative 18.7% margin. The company’s cash burn was similar to its $116.8 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).

Acushnet’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 15.9%, slightly better than typical consumer discretionary business.

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. Uneventfully, Acushnet’s ROIC has stayed the same over the last few years. Given the company’s underwhelming financial performance in other areas, we’d like to see its returns improve before recommending the stock.

Acushnet reported $40.6 million of cash and $944.2 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 $389.6 million of EBITDA over the last 12 months, we view Acushnet’s 2.3× net-debt-to-EBITDA ratio as safe. We also see its $25.75 million 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 enjoyed seeing Acushnet beat analysts’ revenue, EPS, and EBITDA expectations this quarter. Overall, we think this was a decent quarter with some key metrics above expectations. The stock remained flat at $64.98 immediately following the results.

Updated: May 16, 2025 at 10:50 PM EDT

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

Acushnet falls short of our quality standards. First off, its revenue growth was uninspiring over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its remarkable EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its projected EPS for the next year is lacking. On top of that, its low free cash flow margins give it little breathing room.

Acushnet’s P/E ratio based on the next 12 months is 19.3x. At this valuation, there’s a lot of good news priced in - we think there are better opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $67.71 on the company (compared to the current share price of $72.08), implying they don’t see much short-term potential in Acushnet.

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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