Clarus Corporation Moves Higher On Preliminary Results
Clarus Corporation (NASDAQ: CLAR) appears to be perfectly positioned for today's times. The company operates in two segments with strong secular tailwinds blowing in both that we do not see subsiding. On the one hand, is the Black Diamond equipment segment offering highly desirable gear for winter sports enthusiasts while on the other is Sierra. Sierra manufactures a range of high-quality precision ammunition for the sport shooting industry and, if you didn't know, ammunition is the most expensive part of shooting in both upfront and repeat costs and Sierra makes a precision product. Demand for ammunition is so high in fact, that when coupled with the global supply chain issues plaguing the market, Sierra's core product line is out of stock. Regardless, sales across the network are so strong that Clarus raised its guidance yet again and shares are about to set a new all-time high.
Clarus Corporation Growth Accelerates Again
Clarus Corporation has had a very strong rebound from its pandemic lows in which revenue not only reaccelerated to its pandemic highs but growth has far exceeded those levels. The last quarter saw revenue growth top 145% but that is, of course, versus the weak Q2 2020 comparison. Discounting that, the company's revenue has been accelerating from the low double-digits to the high double digits over the past few quarters and it appears to be accelerating again.
The new guidance for the third quarter is calling for revenue in the range of $107 to $108 million which is good for a gain of 66% to 67% over last year. This is versus the consensus estimate of $99.56 and we see upside risk even in this guidance because demand for the gear is that strong. As for the year, the company is expecting revenue growth in the range of 62% or near $362 million versus the previous guidance and consensus estimate of $350 million.
What this means for the market, of course, is a round of upgrades from the analyst and the analysts are already bullish on the stock. The Marketbeat.com consensus rating is a Buy/Strong Buy with a price target just below $31.50. The consensus price target has, notably, risen more than 100% in the last year and 15% since the last earnings report. The consensus target assumes almost 9% of upside is still available for this stock and we think that is a low price target. The high price target of $36 implies almost 20% of the upside and even that may be a low target for this stock. With revenue and earnings outpacing the consensus estimate at such a high rate the stock may be in for a multiple expansion as well.
Clarus Is A Speculative Play On Dividends
Clarus pays a dividend but it's a very small 0.36% yield. The yield is small but the payout is incredibly safe and comes with a positive outlook for dividend growth, at least in our view. The company has not ever increased its dividend in the past but, by our assessment, a dividend increase and even a series of dividend increases could be sustained for many years. The payout ratio is only 8% of the consensus estimate that we know to be too low so there is available earnings. This is backed up by a healthy balance sheet that comes with a moderate amount of debt but a large amount of coverage and free cash flow as well. We won't be holding our breath until the company raises the dividend but we won't be surprised when it happens either.
The Technical Outlook: Clarus Signals Continuation
Shares of Clarus gained nearly 5% in the wake of the updated guidance and appear to be continuing a strong uptrend. Not only is price action advancing a move upward from support at the $25 level, but the indicators are rolling into what could become a strong trend following entry-signal. The price action itself smacks of a bullish triangle that, if confirmed, could lead the stock up another $10 to $15 or more than 50%.
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