Slam! Bang! Whack! Fitness Companies May Be More Rewarding Than You Thought

In these months of winter, after the gourmandising of the holiday season, the mind occasionally turns to fitness and recreation.  The smallcap market offers a variety of opportunities in the area, and the sporting-goods industry has been on an upswing recently as well.  According to Yahoo! Finance, this group of companies was among the biggest gainers as the market swooned late last week:

NLS Elliptical Trainer -- full-body aerobic workouts

One of the strongest gainers was Vancouver WA-based Nautilus Group (NYSE: NLS:, which has just completed the sale of certain of its assets related to health-club equipment to a Chinese buyer.  NLS will concentrate its efforts on retail and direct-to-consumer channels of its well-known Nautilus, StairMaster, Bowflex and Schwinn brands.  The fitness industry has been through well-publicized ups and downs, but the goodwill of brands such as those that NLS holds continue to be attractive to investors.  NLS enters 2010 with a  balance sheet clean of longterm debt, and an announced expectation of a $12 million income-tax refund this month.  Sales are down, as one might expect, from 2008 (the latest numbers are for the September quarter and nine months), but NLS remains profitable, and it has those golden names, some of which are almost as generic as Kleenex and Xerox.  The stock closed Friday at $2.54, a bit off its 52-week high of $2.96, but up more than 20% on the day, with volume of well over 400,000 shares.  NLS market cap is about $80 million; with revenues at about $135 million for the 9 months, the ratio of sales to market cap may be attractive, especially considering the stronger balance sheet and continuing profitability.

Please keep in mind that we do not recommend stocks or investments; we only write about companies that we find interesting or neglected.  Do your own diligence.

PingPong is the brand; table tennis is the Olympic sport name

NLS is not the only one with big names that have become standard vocabulary for most of us.  Consider Evansville IN-based Escalade Inc (Nasdaq: ESCA;, which owns the brand that opened China to the west: PingPong (I grew up thinking that was the name of the game, which is more properly called table tennis).  But PingPong is not the only asset of this diversified smallcap, which also makes products for basketball and archery, among other Olympic sports.  And to counter any cyclicality, ESCA also has an office products division making hole-punches, paper-folders & shredders and other everyday desktop appliances, sold under established brand names like Mead Hatcher and Martin Yale.  ESCA shares also closed at $2.54 on Friday, but they were off a bit (3%) on the day, and down from a 52-week high of $3.44.  ESCA results for the 9 months showed a bounceback to profitability, an acceptable current ratio, and negligible debt.  With revenues that look to end the year at well over $100 million, ESCA’s market cap is about $32 million, and its daily volume is paltry (under 10,000 average).  But neglected companies like ESCA may provide some buoyancy in suitable portfolios.

Big Bertha: One of the best-known names in golf

From relatively unknown ESCA, we turn to one of the best-known sporting-goods companies: Carlsbad CA-based Callaway Golf (NYSE: ELY:, which burst upon the golf scene with one of the biggest names to hit the sport: Big Bertha.  Today’s Callaway tends to group its clubs under names like Diablo and Odyssey, but Big Bertha is still an anchor product.  ELY closed Friday up a tad at $8.39 vs a year-high of $9.40, and on volume of well over 1 million shares.  Analyst Scott Swanson from Crowell Weedon expects ELY to perform well in 2010, in spite of a downer 2009:  The market cap is about $540 million, and not missing a trick, Callaway is expanding into India:

Poway CA-based Aldila Inc (Nasdaq: ALDA; is also a golf play, although primarily known for club shafts made from space-age carbon fibers, resins and such.  Its latest new brand is Voodoo, definitely something that some golfers would engage in if that’s what it took to shave a few points off the old score.  Although it is an old and well-established name (founded in 1972), ALDA shares closed Friday slightly up at $3.98, vs a year-high of $5.95.  That reflects a yet-to-turn-around P&L that looks from the 9-month results to show revenue in the $45 million range or so for the year, with a fairly modest loss, although its latest balance sheet shows a strong current ratio, which may mean staying power.  Expense-cutting seems to be taking effect.  Market cap is about $21 million (a little less than half annual revenues), and daily trading volume is low.

Humminbird fishfinder from Johnson Outdoors

Finally, we might look at Racine WI-based Johnson Outdoors (Nasdaq: JOUT;, which is primarily a camping/fishing/snorkeling type of company, but with some fairly high-tech approaches (GPS for fish-finding — yeay).  JOUT is on a non-calendar year, and announced sales of  $356 million for 2009 in November, with a loss that is about 1/7th of what it was the year before.   Current ratio is better than 2:1, and JOUT says it has restructured its borrowings to significantly decrease interest costs in 2010.  The shares closed Friday at $10.69, nearly flat on the day, vs a year-high of $11.47, and a market cap of a little over $100 million, less than a third of sales.  Volume is very low, under 4,000 shares per day.


3 thoughts on “Slam! Bang! Whack! Fitness Companies May Be More Rewarding Than You Thought

  1. Somebody dropped a link to your site on Twitter and that is where I first found your blog. Fancy the stuff I have seen so far and will unquestionably return to read more in a while. By the way, are you on Twitter?

  2. Great blog. I enjoyed the info on the Johnson Outdoor, especially interested in the Humminbird fishfinders. Johnson just announced that fiscal third-quarter earnings rose nearly 16 percent. I hope they are right about a recovering recreational market!

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