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Bull Of The Day: Callaway Golf (ELY)

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Callaway Golf (ELY - Free Report) is a Zacks Rank #1 (Strong Buy) and sports a growth style score of A - so you know the stock is on my radar screen.  With the golf season reaching its peak, this stock is soaring.  ELY is the Bull of the Day.

Description

Callaway Golf Company, makes and sells golf clubs, golf balls, golf bags, and other golf-related accessories. Callaway Golf Company was founded in 1982 and is based in Carlsbad, California.

Recent Earnings

On August 2, the company posted EPS of $0.63 and that was $0.16 better than expected.  Revenue growth was 30% on a year over year basis and also came in ahead of expectations.

The company also guided higher for 3QEPS and the full year as well.

Estimates

Since the report estimates have inched higher.  The current quarter shows the loss of 6 cents shrinking down to a loss of 4 cents.  The full year Zacks Consensus Estimate moved from $0.81 to $0.86.

Next year looks even better, with the Zacks Consensus Estimate for 2019 moving from $0.88 to $0.95.

Valuation

The valuation here is right where you would expect it to be for a stock that is posting 30% year over year revenue growth.  I see a 25x forward PE and an 18x trailing PE.  A price to book of 2.8x is reasonable as is the 1.7x price to sales multiple.

What stands out to me is the margin expansion over the last three quarters.  The company posted operating margins of 4.9%, then 7.5% and finally 9.2% in the most recent quarter.  That is just what I want to see!

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