In This Article:
Johnson Outdoors Inc. JOUT is benefiting from strategic investments to improve its profitability and undertaking cost savings efforts to enhance margins. Also, the company trading at a discount compared with its peers is an additional advantage that should be noticed by investors in the market.
The Zacks Consensus Estimate of the company’s fourth quarter of fiscal 2024 earnings indicates year-over-year growth of 56.4%. Also, the earnings estimate for fiscal 2025 indicates a whopping 2,328.6% growth trend. The growth prospect is further solidified by a VGM Score of A, backed by Growth and Value Scores of A. The positive trend signifies bullish analysts’ sentiments, robust fundamentals and prospects of an outperformance in the near term.
However, shares of this producer of outdoor recreational products have lost 11.3% in the past three months against the Zacks Leisure and Recreation Products industry’s 9.1% growth. JOUT’s prospects are notably marred by the increased expense and cost structure and ongoing weak consumer demand. The challenging macroeconomic scenario and lingering inflation risks are contributing to these headwinds, thus adversely impacting the company's profitability.
Image Source: Zacks Investment Research
Let us discuss the factors why investors must retain this Zacks Rank #3 (Hold) stock for now.
JOUT Stock’s Driving Factors
Cost-Saving Efforts: Given the ongoing inflated market condition, Johnson Outdoors has been undertaking cost-saving initiatives to improve its bottom line and increase profitability. On the recent earnings call, the company announced further expansion of its cost-saving efforts and evaluation of its cost structure for additional efficiency opportunities.
The primary focus of JOUT, based on this initiative, has been on its production factories and the overall business operations and getting efficiencies out of them. The increased efficiencies will directly contribute to its margin expansion and improve profitability. The company is said to have been progressing with its cost-saving expansion strategy and will provide an update on its notable business impacts in the upcoming quarter’s release. Investors can consider this aspect while making decisions in favor of JOUT stock.
Accretive Investments: Apart from implementing efforts to reduce costs and increase efficiency, Johnson Outdoors is also focusing on mission-critical initiatives to drive growth. The investments primarily focus on enhancing innovation and digital and e-commerce capabilities.
Innovation is one of the key factors to the company’s success as creating consumer-focused products and driving technology advancements has always enabled it to deliver the best outdoor experiences across its categories. Currently, JOUT is working on a pipeline of new products to further drive its success. Furthermore, enhancing digital and e-commerce capability is another main priority as a robust online presence provides key consumer touch points for its brands from product research to purchase to post-purchase support.
Trading at a Discount: Johnson Outdoors is currently trading at a discount relative to the industry peers on a forward 12-month price-to-earnings (P/E) ratio basis. JOUT’s forward 12-month P/E ratio is 19.2, lower than the industry’s ratio of 24.3. The discounted valuation indicates that the stock remains an attractive option for investors looking for a suitable entry point.
With the ongoing cost-savings and business transformative initiatives, the company is positioning itself well for achieving notable growth across its top and bottom lines. The current discounted valuation situation may not last long, thus investors must stay ahead going forward while making decisions about the stock.