Tee It High And Let It Fly

Tee it high and let it fly is an old golf adage and the mindset all long hitters live by.

Callaway Golf Company (ELY) Chief Executive Officer (CEO) Oliver Brewer, III and Chief Financial Officer (CFO) Brian Lynch are taking a swing at their company stock. Brewer purchased 4,000 shares of ELY at $25.55 for a total of $102,199 and Lynch invested $386,900 for 15,000 shares at $25.79. (1)

Callaway Golf Company designs, manufactures, and sells golf clubs and golf balls, apparel, gear, and other products. The company sells its products through golf retailers, sporting goods retailers, mass merchants, Internet retailers, department stores, field representatives, on-line retailers, mail order stores, and in-house sales representatives, as well as to third-party distributors in the United States and approximately 100 countries.

This C-suite twosome appears to be comfortable on this course, scoring well with their past insider trades. The duo seems to know when to lay up or go for the green.

Since 2012, Brewer has bought and sold ELY shares a combined seven times, three buys totaling $363,599 and four sells for a combined $21.3 million. The CEO’s timing has been strong. In 2012, he bought at $5.50. From August 2017 to April 2018, he sold three times from $13.31 to $17 per share. Brewer turned bullish again in 2019, buying at $15.14. Two years later, he sold again at $37.21. (2)

CFO Lynch plays a similar game. He started off as a pure seller, cashing in five consecutive times from October 2015 to March 2018. All in all, he collected $1.95 million. In May 2019, he switched sides and bought nearly $100k of ELY stock at $15.13. Lynch returned to his old habits, selling once again in May 2021, banking $2.66 million at $34.50. (3)

As we mentioned up top, both teed up buy tickets last week.  So far, as you can see, Brewer and Lynch have excellent, profitable track records. Of course, as the lawyers say, past performance is no guarantee of future performance.

ELY finished trading Friday, December 10, 2021, at $28.08 with a consensus one-year price target of $43.00. (4). Wall Street sees next year’s sales rising more than 17% to $3.64 billion versus this year’s consensus $3.11 billion forecast. Despite anticipated top line growth, analysts only see the bottom line growing by $0.04 next year, from $0.67 to $0.71. (5) Although, 2022 earning per share (EPS) estimates have risen sharply in the last 30 days, climbing from $0.44 to $0.71.

Callaway Golf’s price to earnings (P/E) and price to sales (P/S) are mostly inline with its peer group. If it stays that way in 2022 and ELY hits Wall Street’s sales and profit targets, then shares would price out at $25.56 and $37.18, using the industry average P/E of 36 and P/S of 1.9 respectively.

Overall: Callaway Golf Company (ELY) could offer potential investors some attractive upside on a price to sales basis. However, the fairway to a higher price could be narrow as earnings growth is limited, as of today’s consensus forecast. That being said, CEO and CFO Brewer and Lynch’s trading histories should be considered as well.

ELY stock might be appropriate for investors with an above-average risk tolerance and a 12-to-24 month time horizon.

 

1 – https://www.secform4.com/insider-trading/837465.htm

2 – https://www.secform4.com/insider-trading/1072918.htm

3 – https://www.secform4.com/insider-trading/1551277.htm

4 – https://finance.yahoo.com/quote/ELY?p=ELY&.tsrc=fin-srch

5 – https://finance.yahoo.com/quote/ELY/analysis?p=ELY