NEW YORK (TheStreet) -- Shares of Cabela's (CAB) were gaining 19.2% to $39.83 with heavy trading volume on Wednesday after activist investor Elliott Associates disclosed an 11% stake in the hunting, fishing, and camping supplies retailer.
In an SEC filing, Elliott said it believes "that, in light of the robust environment for private equity investment in retail companies, potential strategic interest in the Issuer, and the Issuer's substantial asset holdings, there exist multiple pathways for [Cabela's] to unlock significant unrealized value."
The activist investor will look to "engage in constructive dialogue" with the retailer's board of directors about opportunities to "maximize shareholder value through various strategic alternatives," including selling the company. Other alternatives mentioned include "asset monetization, capital allocation and capital structure optimization, and operational and management initiatives."
About 4.1 million shares of Cabela's were traded by 12:21 p.m. Wednesday, above the company's average trading volume of about 1.5 million shares a day.
TheStreet Ratings team rates CABELAS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate CABELAS INC (CAB) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and generally higher debt management risk.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.8%. Since the same quarter one year prior, revenues slightly increased by 4.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- 44.47% is the gross profit margin for CABELAS INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 4.71% trails the industry average.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Specialty Retail industry and the overall market, CABELAS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Specialty Retail industry average. The net income has decreased by 18.8% when compared to the same quarter one year ago, dropping from $53.84 million to $43.71 million.
- You can view the full analysis from the report here: CAB