The growing global interest in sports and fitness activities is driving the sports retail industry forward. Given the industry’s rosy prospects, investors could look into fundamentally strong retail stocks, Gaia, Inc. (GAIA), American Outdoor Brands, Inc. (AOUT), and Vista Outdoor Inc. (VSTO), targeting major gains this month.
The rise in popularity of recreational sports facilities, including aerobics, swimming, and gyms, is attributed to increased awareness of the importance of exercise in the fight against obesity and other associated issues and is anticipated to create expansion prospects in the recreation industry over time.
Therefore, the recreation services market is expected to grow at a CAGR of 5.9% until 2028.
The global fitness and recreational sports centers market is driven by the increasing elderly population participating in fitness activities, aided by technologically advanced equipment designed for older users. The global fitness and recreational sports centers market is expected to grow at a CAGR of 10% until 2027.
Furthermore, in connection with the athleisure trend, customers are increasingly striving for designer sports accessories that incorporate aspects of sports layout. Besides this, the sustained shift toward healthier lifestyles is expected to motivate global demand for sports accessories.
The global sport accessories market is expected to grow at a CAGR of 6.5% until 2023.
With these favorable trends in mind, let's delve into the fundamentals of the three best Athletics & Recreation stocks, beginning with the third choice.
Stock #3: Gaia, Inc. (GAIA)
GAIA operates a digital video subscription service and on-line community for underserved member base in the United States, Canada, Australia, and internationally. It has a digital content library with various titles in Spanish, German, and French languages available to its subscribers on internet-connected devices.
GAIA’s trailing-12-month gross profit margin of 85.88% is 74.8% higher than the 49.13% industry average. Its trailing-12-month asset turnover ratio of 0.58x is 11.8% higher than the 0.52x industry average.
GAIA’s net revenue increased 1.6% year-over-year to $21 million in the fiscal third quarter, which ended September 30, 2023. Its gross profit came in at $17.24 million. Also, adjusted EBITDA came in at $3.94 million.
GAIA’s revenue is expected to increased 7.3% year-over-year to $21 million for the fiscal fourth quarter ending December 2023.
The stock has gained 21.2% over the past year to close the last trading session at $2.86.
GAIA’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
GAIA also has a B grade for Value, Stability, and Sentiment. It is ranked first out of 36 stocks in the Athletics & Recreation industry.
To access additional ratings for GAIA’s Growth, Momentum, and Quality, click here.
Stock #2: American Outdoor Brands, Inc. (AOUT)
AOUT provides outdoor products and accessories for rugged outdoor enthusiasts in the United States and internationally. It offers hunting, fishing, camping, shooting, and personal security and defense products.
AOUT’s trailing-12-month gross profit margin of 45.90% is 29.4% higher than the 35.47% industry average. Its trailing-12-month levered FCF margin of 11.01% is 114.3% higher than the 5.14% industry average.
During the fiscal second quarter that ended October 31, 2023, AOUT’s net sales increased 6.4% year-over-year to $57.93 million. Non-GAAP net income came in at $3.29 million, while its non-GAAP net income per share came to $0.25.
Analysts expect AOUT’s revenue to increase marginally year-over-year to $51.14 million for the fiscal third quarter ending January 2024. Its EPS is expected to be $0.02 for the same quarter.
Shares of AOUT have gained 5.8% intra-day to close the last trading session at $7.67.
AOUT’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Growth, Value, Sentiment, and Quality. It is ranked #2 in the same industry.
Beyond what is stated above, we’ve also rated for Stability and Momentum. Get all AOUT ratings here.
Stock #1: Vista Outdoor Inc. (VSTO)
VSTO in Anoka, Minn., designs, manufactures, and markets consumer products in the outdoor sports and recreation markets in the United States and internationally. The company operates through two segments: Shooting Sports and Outdoor Products.
On December 12, 2023, VSTO and Czechoslovak Group a.s. (CSG) announced the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 in connection with CSG’s proposed acquisition of Vista Outdoor’s Sporting Products business.
Its trailing-12-month ROCE of 36.15% is 297% higher than the 9.10% industry average. Its trailing-12-month asset turnover ratio of 0.46x is 106.4% higher than the 0.22x industry average.
VSTO's net came in at $676.81 million in the fiscal second quarter ended September 24, 2023. Adjusted EBITDA came in at $116.12 million. Its net income came in at $44.42 million and EPS came in at $0.77.
The consensus revenue estimate of $16.37 billion for the year ending December 2023 represents a 19.2% increase year-over-year. Its EPS is expected to grow 189.4% year-over-year to $4.46 for the same quarter.
The stock has gained 10.8% over the past month to close the last trading session at $38.12.
VSTO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
VSTO has an A grade for Value and a B in Momentum and Quality. It is ranked #5 in the same industry.
Click here to see the additional POWR Ratings for VSTO (Growth, Stability, and Sentiment).
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
VSTO shares were trading at $28.00 per share on Thursday morning, up $0.75 (+2.75%). Year-to-date, VSTO has gained 14.90%, versus a 24.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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