Stocks to Buy Before They Join This Market Rally: Sportsman’s Warehouse (SPWH)
YTD Performance: -48%
What’s particularly surprising about the decline in shares of Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH) is that nothing’s really happened so far in 2017 — at least nothing that should be a negative for SPWH stock.
SPWH hasn’t reported fourth-quarter earnings yet (they are due on Thursday). Gander Mountain did declare bankruptcy, perhaps a bad omen for Sportsman’s Warehouse. But the troubles there — and the closure of 32 Gander Mountain stores — would seem a modest benefit for SPWH’s online business. There are concerns about firearm sales, to be sure. But gun manufacturer stocks like American Outdoor Brands Corp (NASDAQ:AOBC) and Sturm Ruger & Company Inc (NYSE:RGR) have stabilized since the election.
Rather, it seems concern about retail more broadly has taken down SPWH stock. And it’s possible that selling of retail ETFs has added pressure.
But the decline has left SPWH simply too cheap, trading at less than 7x the low end of fiscal 2016 guidance. That’s despite the fact that EPS is supposed to increase year-over-year, by almost 10% at the midpoint of guidance. And it’s despite the fact that Sportsman’s Warehouse believes it can quadruple its current store count.
Shares began to stabilize last week, and they would seem to have possibly substantial upside from here.
As of this writing, Vince Martin was long SPWH.