On Thursday, Vista Outdoor Inc . (NYSE:VSTO) received an upgrade in stock rating from Roth/MKM, moving from Neutral to Buy. Correspondingly, the price target was increased to $38.00, up from the previous $31.00. The upgrade is based on the firm's perspective that investors have several routes to potential gains with Vista Outdoor's stock.
The analyst from Roth/MKM pointed out that in a base case scenario, Vista Outdoor is expected to sell its ammunition segment to CSG, which would result in Vista becoming a stand-alone business focused on outdoor products.
This transaction would provide Vista Outdoor shareholders with $12.90 per share in cash and shares of Revelyst, which includes approximately $7 per share in cash. This implies a valuation of around $13 per share for the company, which has the potential to earn about $2 per share in earnings.
The analyst further explained that if the deal with CSG does not go through, the $37.50 per share cash offer from MNC could serve as an attractive fallback option for shareholders. This offer is seen as an "in-the-money put option," which could provide a safety net for investors.
The upgrade and new price target reflect the firm's confidence in Vista Outdoor's strategic moves and the potential financial benefits that could accrue to shareholders as a result of these transactions. The market will continue to watch the developments of Vista Outdoor's business strategy and the impact on its stock performance.
InvestingPro Insights
With the spotlight on Vista Outdoor Inc. (NYSE:VSTO) following its recent stock upgrade, investors are keen on understanding the company's financial health and future outlook. According to InvestingPro data, Vista Outdoor has a market capitalization of approximately $1.93 billion, and despite recent challenges, it showcases a strong free cash flow yield, as indicated by an adjusted P/E ratio of 10.52 for the last twelve months as of Q3 2024. This suggests that the company is potentially undervalued relative to its cash generation capabilities.
Two InvestingPro Tips that are particularly relevant to the article's context include the high shareholder yield, which denotes the company's efficiency in returning value to its owners, and the expectation of net income growth this year. These insights could signal a positive trajectory for investors, aligning with the optimistic view presented by Roth/MKM's analyst. Furthermore, Vista Outdoor's stock is trading near its 52-week high with a price percentage of 97.76%, reflecting strong recent performance.
For those looking to delve deeper into Vista Outdoor's financials and stock potential, InvestingPro offers an array of additional tips. With the use of coupon code PRONEWS24, investors can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, providing access to even more in-depth analysis and data to guide investment decisions. For Vista Outdoor, there are 11 more InvestingPro Tips available that could further inform your investment strategy.
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