Browsing Golf Industry NewsVIEW ALL

Callaway Golf Stock Moving From Green to Sand Trap

POSTED ON February 3, 2016 @ 10:33 pm

golfclubs1205_600x400

Attention duffers:

After five straight quarterly earnings beats, Callaway Golf (ELYGet Report) looks like it’s in the green and heading for a hole in one.

Its shares, at around $8.60, are up nearly 11% for the past 52 weeks. The stock is on Wall Street’s radar of potential top performers in 2016.

But if you look more closely you will find little, if any, real value.

Must Read: More Squawk From Jim Cramer: Amazon.com’s (AMZN) World Domination Costs Money

Callaway stock has a consensus buy rating and its average analyst 12-month price target of $12 implies some 40% gains from current levels of around $8. However, the stock is not cheap. It carries a price to earnings multiple of almost 200, or nine times the P/E of 21 for the S&P 500 (SPX) index.

In addition, the Carlsbad, Calif.-based company is expected to post of 36-cent loss when it reports fourth-quarter earnings results after the closing bell Thursday.

The expected loss for the quarter comes even as revenue is projected to climb by 10.3%, suggesting Callaway struggles to turn revenue into profits. For the full year, earnings are projected to decline 30% to 14 cents a share, while full-year revenue of $839 million would mark a decline of 5.4% from the year-ago quarter.

The company has done many things right, including delivering 4 cents per share in profit for the third quarter against expectations for a 4-cent loss.

But the easy money has already been made, and new investors should consider what the current P/E and the huge earnings growth expectations imply. Even if Callaway logged its sixth straight earnings beat Thursday, it would need to demolish expectations and deliver upbeat guidance to prevent a selloff in the stock. Given the current weakness in the golf industry, that may be too much to achieve.

In that vein, Calloway stock has less implied value, based on the fiscal 2016 consensus of 34 cents a share, which puts its forward P/E at 25 — eight points higher than the S&P 500 index. Callaway’s third-quarter operating margin of 2% is three percentage points lower than the industry average, according to data compiled by Yahoo! Finance.

It’s tough to forecast strong profits in 2016 when revenue is projected to climb by only 5.4%. That makes Callaway a risky investment. If you want to buy, wait for the stock to get to around $7 before you take a swing at it.

 Source: TheStreet

Comments are closed.


CLICK HERE TO Sign Up for the GIC Newsletter for all the latest Industry News.

Please enter your details:

I am interested in:

  • News
  • Operations
  • Marketing
  • Recruitment / Jobs
  • Grow the Game
Golf Industry Central Grow the Game Central Golf Recruitment Central Golf Operations Central
hd-logo

The Ladies’ Golf Union And The R&A Sign Merger Agreem...

27 July 2016, St Andrews, Scotland: The merger...

2016-07-27_1358

Bob Harrison leading new project at Newcastle Golf Club in A...

Golf course architect Bob Harrison is leading a...

The Patterson-Spitzig tribe has been expanded Downunder!...

2016-06-09_1540

By Mathilda Andersson  Last month, the Australian and New Zealand golf industry was guested by two of America’s leading club industry speakers...

Light plane ditches into Liverpool golf course lake...

2016-07-22_1041

Three people have escaped injury after a light plane they were travelling in made an emergency landing on a golf course in...

SEEKING: General Manager – The Flinders Golf Club...

fgc golf

A great opportunity exists for a developing manager to lead the team at this unique golf club. Perched high on the cliff...

Competition Golf numbers on the rise across NSW...

golfnsw_540

Participation in club golf across New South Wales has increased by almost nine percent in the three months to June. The number of...

The Ladies’ Golf Union And The R&A Sign Merger Agreement...

hd-logo

27 July 2016, St Andrews, Scotland: The merger between the Ladies’ Golf Union and The R&A has moved close...

Dancing On Moonlight Private Golf Course...

IMG_20160218_155021

By Mathilda Andersson In Ohoka, a few minutes north of Christchurch, lies the beautiful estate of renowned New Zealand...

HK’s Clearwater Bay to host first PGA TOUR China Series eve...

2016-07-25_1043

HONG KONG (July 25, 2016)—The PGA TOUR and The Clearwater Bay Golf & Country Club announced today that the...

The Asian Tour and the European Tour announce ‘Strategic Al...

ASIAN-TOUR-LOGO-HORIZONTAL_no-border-300x117

Sentosa, Singapore, July 18: The Asian Tour and the European Tour have today announced a ‘Strategic Alliance’ which officially...

Light plane ditches into Liverpool golf course lake...

2016-07-22_1041

Three people have escaped injury after a light plane they were travelling in made an emergency landing on a...

Dancing On Moonlight Private Golf Course...

IMG_20160218_155021

By Mathilda Andersson In Ohoka, a few minutes north of Christchurch, lies the beautiful estate of renowned New Zealand...