When I first quickly looked through the results I couldn't tell this company was growing much at all, because it's quite easy to miss. Yearly profits seem to have stagnated despite revenue growth of 5-10% for six years straight now. However, in 2015 Amer Sports had a record year in profit at 120 million euros, and in early 2015 Amer Sports stock also sky-rocketed to its current level 25 € from 15 €. In 2016 they are on track to set another record profit year. Despite all this the stock is expensive even if you assume moderate growth for the company, but I believe they will stay on track for significant increases for many years to come, which makes this stock slightly under-valued.
Amer Sports was a company that got hit badly by the 08-09 crisis. After that they have been focusing on the survival on the company, and very conservative profitable growth. These goals have been clear since after the crisis, and many targets were set to make sure the business is moving in the correct direction. All major growth targets were reached on time, and the overall situation has gotten even better than expected. Amer Sports has set its next major targets for 2020, where they aim for 3,5 billion euros in revenue, which seems very aggressive considering the revenue in 2015 was about 2,5 billion. If this target is reached, the growth would be about 40 % compared to 2015, but since all costs don't linearly increase with the amount of revenue, the profit could increase much higher compared to 2015.
Next we can go through how Amer Sports is going to attempt to achieve these ambitious goals they have set for themselves. Amer Sports owns many sports brands such as Wilson, Arc'teryx, Salomon, and many other smaller quality associated brands. The company splits its products into three main categories which are Outdoor, Ball Sports, and Fitness. It isn't surprising to find out that Outdoor is the most profitable product segment of the company, since clothing items typically have higher margins than most other products. All three categories have seen about equal growth which is impressive, since it's easy to lose track and put too much focus on your most profitable segment, the company has a very good history of discipline and planned actions.
Currently most of the best selling clothing items include jackets that are very sporty and useful looking running jackets, and hiking jackets. They are not necessarily something I would wear in my every-day life, but during the 2016 Commercial Market Day presentation they show-cased the new Arc'teryx collection of clothing that didn't stand out as much, but were more professional and fit better for every-day use which is something I liked a lot. To increase and expand further I believe this is the exact area Amer Sports should focus on, and surprisingly this is the first time they've released items like this. The company also seeks new business from all of its other segments as well. They are experimenting with digitally fitted baseballs and footballs to help professional sports teams get increased value from analyzing games and practice.
Overall Amer Sports has a great history with minimal changes to management, which makes me believe the 2020 goals are very realistic, and that the numbers weren't pulled out of thin air. Another thing to note is the costs of business have gradually gone up, but the profit has gone up significantly, which makes further revenue increase have an even further impact on profit. Having reached its previous goals early, the company also decided to attempt reach the following goals by organic growth, which makes following profits much more predictable as well.
If the set targets are reached on time the stock is quite under-valued. Even with a conservative prediction the stock should be worth about 30 €, which makes the current stock value (Amer Sports A - 25.26) a slight under-valuation. That's why I suggest to go long on this stock, and to follow the coming quarters closely to see if the business is on path to reach their targets.
I will be following the development of this stock regularly, and updating my predictions accordingly.
I publish my analysis one day prior to Seekingalpha on finnvestor(dot)blogspot(dot)com.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.