GOLF - Topgolf Callaway Brands: Cheap Valuation Relative To Peers Post Earnings
2024-02-16 09:24:46 ET
Summary
- Topgolf Callaway Brands Corp. reported better than expected Q4 2023 earnings on Tuesday.
- Despite the rally this week, shares are still down over 50% since its all-time highs in 2021.
- MODG's EV/EBITDA multiple is now considerably below its direct peer, Acushnet Holdings.
- Many attribute MODG's share price decline to increased debt levels, lower profit margins, and growth concerns.
- Ultimately, I believe a pairs trade between MODG and GOLF could present an interesting short-term opportunity.
Summary
Shares of Topgolf Callaway Brands Corp. ( MODG ) are down more than 50% since its all-time highs set in 2021. The widely known golf company reported better than expected revenue this week, sending shares higher. Despite this, Wall Street is still skeptical on the longer-term plans with Topgolf Management's expansion plans have been expensive and unsurprisingly have impacted bottom-line earnings and short-term valuations. However, I think the sell-off over the past few years could be overdone for a few reasons, especially when looking at competitors. Some keynotes:
- MODG's EV/EBITDA multiple is now considerably below its direct peer, Acushnet Holdings (NYSE: GOLF ).
- Many attribute MODG's share price decline to increased debt levels, lower profit margins, and growth concerns.
- The golf industry has historically held up well during recessions.