AMMO Inc. (NASDAQ: POWW) delivered powerful record-setting FYQ4 results that should have investors stoked for the future. In fact, AMMO's guidance gives them every reason to be so. In addition to posting a 409% increase in comparative revenues, AMMO increased gross profit margins by 179%, cut operating expenses as a percentage of sales by 58%, and posted a 296% increase in EBITDA to $4.8 million over the same period last year. Better still, AMMO delivered an adjusted EPS of $0.04, a more than 167% increase over last year. Its year-over-year increases are equally impressive.
There, AMMO reported a 300% increase in sales to $62.5 million, a 173% increase in gross profit margins, EBITDA of $8.1 million, and an adjusted EPS increase to $0.07, a 150% jump over 2020 totals. Still, as impressive as those numbers are, AMMO's guidance told investors that the best may be yet to come.
And that makes any weakness in share price a compelling investment opportunity. In fact, current prices, while higher by 154% YTD, still appear to significantly undervalue the company.
Here's why:
Growth In Every Metric
Foremost, by any measure, AMMO is in hyper-growth mode. Its triple-digit percentage gains across every business metric substantiate that point. Better still, AMMO is maturing on the capital side as well, with its inclusion into two Russell indexes leading to a more than 50% ownership stake of its shares outstanding held by insiders and institutions. And while index inclusions can sometimes weigh on sector stocks in bear markets, the beta applied to AMMO indicates that it will often outperform when the bulls return. In fact, a return to its June 30th high of $10.37 is in the crosshairs.
The more excellent news is that investor optimism is well-justified. In fact, its transformational acquisition of Gunbroker.com arguably puts AMMO in its best operating position ever. That point is exemplified by AMMO heading into its new fiscal year following its best quarterly performance in company history. Those results also put momentum at its back.
Better still, AMMO is charging into its new year targeting near-unprecedented US demand for ammunition that is showing no signs of slowing down. And to capitalize on that market, AMMO broke ground on its new state-of-the-art facility, which is expected to be fully operational in approximately one year. To maximize that facility's potential, AMMO established a cutting-edge design firm, announced a contract for the design and manufacture of technologically advanced ballistic match ammunition for the US Department of Defense, and intends to maximize the new market opportunities created by its Gunbroker acquisition. Thus, its capital improvements will soon be monetized.
In fact, with ammunition sales at Gunbroker accounting for only about 3% of its revenues, there is an opportunity for potentially exponential growth through that asset alone. And with more than 6 million active users on that site, AMMO is well-positioned to make that happen by marketing directly to the consumer.
Guidance, by the way, projects more record-setting quarters to come. The company expects to generate $41 million during its FYQ1 and more than $190 million for the year. And that only includes two months of Gunbroker operations. Thus, expect next year to be even better.
Bullish Sentiment For AMMO, Inc
In fact, its blowout record-setting FYQ4 and transformative $240 acquisition of GunBroker.com result from already being a substantial player in the sector. This year, AMMO expects to deliver over 750 million rounds of ammunition to a diverse list of customers. And following its GunBroker.com acquisition, the company anticipates having products available in more than 1600 retail locations. Even better, when its upgraded manufacturing facility becomes fully operational, AMMO expects that it can triple its production capacity. And by leveraging its robust multi-channel distribution network, it can meet extraordinary demand from law enforcement, military, and sports markets. In 2020, those markets accounted for an estimated $32 billion combined market opportunity.
Moreover, with a recent surge in gun permit applications and background checks through June, analysts don't expect demand for its products to slow down anytime soon. Some analysts suggest that political debate could add to the already surging demand leading to sold-out store shelves and order backlogs for AMMO.
In fact, AMMO noted that its ammunition backlog increased by 125% in less than six months. And while its proactive marketing initiatives connected them with more than 67,000 dealers, added over 1,000 new customers, and processed over $80 million in booked orders last year, they aren't slowing down. AMMO is gearing up for a surge in direct sales from its over 1,600 retail placement locations, including DICK'S Sporting Goods (NYSE: DKS) and Cascade Farm and Outdoor.
And better still, AMMO is positioned to capitalize on massive new market opportunities this year by leveraging a well-designed business platform and asset portfolio designed to deliver accretive high-margin revenues.
An Impressive Bottom Line
Hence, while its 154% YTD increase is impressive, current prices still appear to undervalue its revenue growth and asset portfolio. But that's not all bad since it also exposes a compelling investment opportunity. Perhaps the most excellent news is that AMMO can be trusted to create shareholder value going forward. In fact, their track record of doing so is impeccable.
Thus, with bullish guidance heading into its new fiscal year and massive revenue-generating momentum at its back, the best position in AMMO may be as a shareholder. Indeed, they are locked and loaded for growth in the back half of 2021.
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