Seeking Alpha
Profile| Send Message|
( followers)  

One stock that has recently caught my attention, and it happens to be at a low price, is Callaway golf (NYSE:ELY). Of course small-cap stocks tend to be more volatile than their large-cap counterparts, but timing the small caps could lead to insurmountable gains.

Source: Finviz.com

Callaway Golf is is engaged in the designing, manufacturing and selling of golf clubs, golf balls, and other accessories used for the sport. The current market price, and Friday November 2nd closing, is $5.72. The current market price, according to the analysts, is highly undervalued to its one-year price target of $7.79 (a 36% price pop). Now that seems like a great deal, right? Let's take a look at what is driving this prediction especially since the company has lost over 70% of its market value from its peak in 2007.

The company has experienced sales decline in excess of 21% since its peak, but is expecting a turnaround with its new CEO, Chip Brewer. Chip was hired in February and is no rookie to the industry; in fact the man lives and breathes golf. I am not in any way an expert when it comes to golf, but do trust the experts when they say Mr. Brewer is the closest thing to Ely Callaway. Not only does Chip have an MBA from Harvard but also receives praise from Callaway Board Chairman Ronald S. Beard:

Chip has extensive knowledge of all facets of the golf business, particularly in the sales and marketing area, and has a real passion for the game of golf. Chip also has great relationships with customers and others in the golf industry and he has done a great job turning around and leading Adams Golf. We believe he is the right leader to entrust with our valuable brands, and the board looks forward to working with him to restore profitability and increase shareholder value.

Since becoming CEO, Chip sold off two noncore businesses, Ben Hogan clubs and Top-Flite balls, and has licensed its apparel and footwear business. The proceeds of the sell-off are going towards a revamp in the marketing and advertising departments in order to pick up a larger share of the market and make up lost ground from a previously weak campaign.

Callaway has a strong balance sheet that is free of long-term debt (net debt is 9.5% of total capitalization), which puts the company at an advantageous position financially. With a recent upgrade to "strong buy" I feel that there is little to lose with the company but lots to gain. Sales have begun to pick up and are expected to return to profitability by 2013. I believe Callaway is ripe for the picking, completely bottomed out and a strong recommendation.

Index-P/E-EPS-1.93Insider Own0.40%Shs Outstand70.99MPerf Week-3.54%
Market Cap406.06MForward P/E-EPS next Y-0.02Insider Trans46.40%Shs Float70.10MPerf Month-11.04%
Income-125.47MPEG-EPS next Q-0.48Inst Own90.97%Short Float10.04%Perf Quarter7.92%
Sales868.00MP/S0.47EPS this Y-515.43%Inst Trans3.00%Short Ratio11.07Perf Half Y-4.67%
Book/sh6.08P/B0.94EPS next Y97.40%ROA-15.91%Target Price7.79Perf Year3.06%
Cash/sh0.83P/C6.87EPS next 5Y11.50%ROE-25.87%52W Range4.97 - 7.26Perf YTD4.00%
Dividend0.04P/FCF-EPS past 5Y49.60%ROI-19.84%52W High-14.19%Beta1.25
Dividend %0.70%Quick Ratio1.72Sales past 5Y-2.73%Gross Margin31.88%52W Low25.34%ATR0.20
Employees2100Current Ratio3.11Sales Q/Q-14.63%Oper. Margin-10.95%RSI (14)57.91Volatility4.69% 3.09%
OptionableYesDebt/Eq0.00EPS Q/Q-31.95%Profit Margin-13.27%Rel Volume2.53Prev Close5.72
ShortableYesLT Debt/Eq0.00EarningsOct 25 AMCPayout-Avg Volume635.81KPrice6.23
Recom1.80SMA202.76%SMA502.84%SMA2001.99%Volume453,345Change8.92%

Source: Finviz.com

Source: Callaway Golf Ripe For The Picking