Byrna Technologies: Up and Ouch, but Not Out
This small-cap defense co. took twist and slip, but here's why you might want to hold on.
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I close my eyes
Only for a moment, and the moment's gone
All my dreams
Pas before my eyes, a curiosity.
- "Dust In the Wind" Kerry Livgren (Kansas), 1977
What the heck?
I wrote about a small-cap, less-lethal defense company, Byrna Technologies BYRN that was about to report second-quarter earnings ahead of Tuesday's opening. I was generally positive in the piece. I revisit BYRN now at subscriber request.
The balance sheet was a plus. I mentioned that hanging on to the 21-day exponential moving average was key. I gave traders a short-term target of $12.50 and an out of $9.50 on the other side.
The earnings were good. Byrna posted a second-quarter unadjusted earnings per share of $0.09 on revenue of $20.269 million. The bottom-line print simply crushed expectations, while revenue was a little on the light side, despite being good enough for year-over-year growth of 76.1%.
In the press release, Byrna highlighted an order for 2,500 SD launchers from the armed forces of a Central American nation and the hiring of a new CFO, Lauri Kearnes who will start this coming Monday.
Byrna's Balance Sheet
As revenue increased 76.1% to $20.269 million, the cost of goods sold increased 45.2% to $7.709 million. This left a gross profit of $12.56 million (+102.6%) on a gross margin of 62%, up from 53.9%. Operating expenses grew 48.1% to $10.647 million, which left operating income of $1.913 million, up from the year-ago comparison of a loss of $992,000. Operating margin moved from the negative to positive 9.4%.
After accounting for currency exchange rates, interest, taxes and other income and losses, net income printed at $+2.221, up from a loss of $1.757 million. This works out to a unadjusted EPS of $0.09 vs. the year-ago comp of $0.05 loss per share.
The balance sheet remains a work of art, with no debt on the books, a nice cash position, not a lot of intangible assets, and tremendously robust current and quick ratios.
The Chart: A Wild Ride
As readers can see, the stock soared out of the gates on Tuesday morning, apexing at $12, above the 200-day simple moving average, but short of our target.
The shares then sold off and failed to hold on to that key 21-day EMA. BYRN closed at $9.98. Kind of awful.
What still stands? Both our target price and panic points. My feeling is to hold, if long, until one of those prices is met. If one entered close to $10, one is not really down yet. Though a quick 20% gain may have been lost due to how quickly the stock ran up and then ran back down, we do place initial panic points 8% below entry for a reason.
At the time of publication, Guilfoyle had no position in any security mentioned.
