Callaway Golf (ELY) named a new CEO today. The new executive comes from Adams Golf (ADGF) where he was very successful in turning around that struggling golf manufacturer. Will he be able to work the same magic with this venerable golf equipment maker? Given his past success and Callaway's low valuation; an investor should definitely look into taking Callaway for a "drive".
6 reasons Callaway looks like a solid buy at $6.50 a share:
- The company has a solid balance sheet with over 10% of its market capitalization in net cash.
- Insiders have been net buyers of the stock over the past six months.
- The six analysts that cover Callaway have a current median price target on Callaway of $9 a share. Given the new CEO's pas success at Adams Golf, it is probable that price target will be revised up in the near future.
- Even before the announcement of the new CEO, the stock appeared to have bottomed and crossed over its 200 day moving average earlier this year (See Chart).
- The stock is selling at just 82% of book value and at near the bottom of its five year valuation range based on price to sales.
- Speaking of sales, Analysts expect revenues to rebound over the next two years. They expect over 10% revenue growth in FY2012 and north of 6% growth in FY2013.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in ELY over the next 72 hours.