In its latest earnings report, American Outdoor Brands (AOBC) outperformed expectations: posting a profit (despite a challenging environment for the industry) and easing any concerns of bankruptcy. However, the company's updated guidance for the remainder of the year (and really for the foreseeable future) was absolutely horrid, crushing my case that the company was clearly undervalued.
Why I Was Bullish
After revisiting my initial investment thesis (back in March 2017), I realized that my analysis was largely correct except for one glaring oversight: I failed to fully account for a prolonged promotional environment fueled by sustained overproduction. To briefly summarize, my bullish case was:
(1) AOBC was a high ROIC business with a history of significant long-term revenue and earnings growth.
