Recreational products manufacturer American Outdoor Brands (NASDAQ: AOUT) beat Wall Street’s revenue expectations in Q4 CY2025, but sales fell by 3.3% year on year to $56.58 million. Its non-GAAP profit of $0.12 per share was 41.2% above analysts’ consensus estimates.

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Company Overview

Spun off from Smith and Wesson in 2020, American Outdoor Brands (NASDAQ: AOUT) is an outdoor and recreational products company that offers outdoor and shooting sports products but does not sell firearms themselves.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, American Outdoor Brands’s demand was weak and its revenue declined by 4.3% per year. This wasn’t a great result and suggests it’s a low quality business.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. American Outdoor Brands’s annualized revenue growth of 2.1% over the last two years is above its five-year trend, which is encouraging.

This quarter, American Outdoor Brands’s revenue fell by 3.3% year on year to $56.58 million but beat Wall Street’s estimates by 5.1%.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months, a slight deceleration versus the last two years. This projection is underwhelming and indicates its products and services will face some demand challenges.

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Operating Margin

American Outdoor Brands’s operating margin has shrunk over the last 12 months and averaged negative 3.5% over the last two years. Unprofitable consumer discretionary companies with falling margins deserve extra scrutiny because they’re spending loads of money to stay relevant, an unsustainable practice.

American Outdoor Brands’s operating margin was negative 6.9% this quarter. The company's consistent lack of profits raise a flag.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for American Outdoor Brands, its EPS declined by 40.1% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.

In Q4, American Outdoor Brands reported adjusted EPS of $0.12, down from $0.21 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects American Outdoor Brands’s full-year EPS of $0.28 to grow 7.1%.

Key Takeaways from American Outdoor Brands’s Q4 Results

It was good to see American Outdoor Brands beat analysts’ EPS expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The market seemed to be hoping for more, and the stock traded down 9.3% to $7.77 immediately following the results.

So should you invest in American Outdoor Brands right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).