ACUSHNET By Matthew Danielson

HOLDINGS CORP.
Acushnet Holdings Corp. Page 1

Sussex County Technical School

Young Investors Society

Acushnet Holdings Corp. Date: March 4th

Symbol: GOLF H e a d q u a r t e r s : F a i r h a ve n , MA U S A R e s e a r c h An a l ys t :
Recommendation: Bu y Current Price: $24.90 Matthew Danielson
Target Price: $28.50 m d a n i e l s o n @ s u s s e xt e c h s t u d e n t s . c o m

COMPANY STATISTICS
Company Overview
Market Cap ($ Bn): $1.755
Acushnet Holdings Corp. was founded in 1910 by Philip E. Young. Their
Enterprise Value ($ Bn): $2.13 focus at the time was to deracinate latex and supply the industry with
52-Week Range: $20.24 - 27.87 rubber, and along the path, make their own products, such as water bottles
and clothing. Now, they succeed with making clothing brands and
Dividend Yield: 2.22%
equipment, #1 high performing golf balls, and flexible golf clubs to enhance
Free Cash Flow Yield: 4.6% the players gameplay.
P/E (Current) 20.8x
Company Products: Titleist, FootJoy, Vokey Design, Scotty Cameron,
P/Book (Current) 2.02x Pinnacle
Return on Equity 11.57% Market Position: Acushnet Holdings Corp. has the best stock price on top
of Callaway close behind in a $10 price per share range. They currently are
in the low $20 range and aim for a price of $25.41
Shareholders: JP Morgan Chase & Company own 5.61% of GOLF.
Wellington Management Company, LLP owns the most with 6.60%.

INVESTMENT THESIS
I rate Acushnet Holdings Corp. (Golf) as a Strong Buy with a Target Price
of $28.50. My recommendation is driven by the following key points:
 Strong Branded Equipment – Acushnet owns the number 1 selling
golf balls and stands out with superior factors over the other market
brands. Golf balls are the best revenue making machine considering
people want to be the best and buy balls that will work well for them,
and most of them end up in the woods or in the lake.
 Multiple Sponsors – Acushnet’s top brand, Titleist, is sponsored by
many top 50 golfers in the world, few being Justin Thomas, Bubba
Watson, and Jordan Spieth. FootJoy has been the #1 undisputed shoe
and golf gloves in the PGA for 65 years straight.
 Worldwide Selling – Acushnet owns multiple stores and facilities all
over the U.S., and in countries and cities, including New Zealand,
Malaysia, Singapore, Hong Kong, Taiwan, Japan, Korea, Thailand,
Sweden, France, Germany and Switzerland
 Page 2 Acushnet Holdings Corp.

Industry Analysis
The golf industry is a small industry to join in, but over the years, more and
more people start playing golf and play multiple rounds a year. Acushnet is
the fastest growing company, up 6.7% in revenue and 16.9% increase in
net sales over last year for the year of 2018. There closest competitor is
Callaway, makes only half of the money Acushnet is making and does not
have many different brands to sell.
Market Snapshot:
When you watch the major tournaments such as the U.S Open
Championship, or the Master’s Tournament, most of the top golfers will
have Titleist and Foot Joy brand in their equipment. That is because they
are so popular in the PGA, winning all men’s and women’s major
championships. Titleist has been the #1 ball in golf for consecutive years.
Scotty Cameron and Vokey Wedges have been the most played wedges
and putters in the PGA tour, and Foot Joy is the #1 shoe and #1 glove in
Golf. When people see these pros using these products, they dream of
being the best golfer ever and will buy these brands.

Competitive Positioning
Moat Analysis: Wide-Moat
Porter's Five Forces Acushnet makes the most popular and consistent brands in the golf world.
Bargaining
They focus on making their products perform well for professionals and
Power of amateurs. They sell to many countries and brings in profit in all of their
Customers
5 stores. They sell to as many as 50 million golfers a year, all who would play
4
3
millions of rounds of golf. With more and more people joining the golf
Intensity of
Barriers to 2
Competitiv world, they’ll look for the best brands to buy and most likely will be
Entry 1
0
e Rivalry recommended top brands like Titleist and Foot Joy, both owned by
Acushnet.
Bargaining
Threat of
Power of
Substitutes
Suppliers

Porter’s Five Forces:

LEGEND
1 High threat
2 Significant threat
3 Moderate threat
4 Insignificant threat
5 Low threat
Bargaining Power of Customers – Moderate Threat (3 out of 5): When you buy new
clubs and apparel, there is not much demand for new clothes and equipment other than golf
balls and tees, the prices are always constant and do not change much.
Intensity of Competitive Rivalry – Insignificant Threat (4 out of 5): Acushnet is the
highest valued company, but their rival, Callaway, is not far behind.
Bargaining Power of Suppliers – Significant Threat (2 out of 5): Acushnet has a strict
budget and with the high demand for metal, plastic, rubber, and other materials, the supplier
can raise the prices and cause issues for the company.

Threat of Substitutes – Low Threat (5 out of 5): Acushnet’s brands have been very
popular and the chances of another company making better brands are significantly low.

Barriers of Entry – Low Threat (5 out of 5): With the high performance of their products,
Acushnet should not fear another company taking their position.
 Acushnet Holdings Corp. Page 3

Revenue Drivers
Pro V1X golf ball Below are the main drivers behind Acushnet’s revenue growth:
Source: Titleist.com
 Newcomers – Many people have been joining the golf world and need the
equipment to play the game. They will roughly spend a minimum of $300 for the
clubs, and the ball and tee prices vary based on the company. With the number of
new golfers coming in, revenue will skyrocket.
 Spenders – Many golfers loss plenty of golf balls due to lakes and other hazards.
The demand for golf balls are and will always be high. A package of a dozen golf
balls cost ranges from $15-30, depending on brand and how new it is. There are
Fastback 2 Putter also those golfers who rage and smash their clubs or break something else and
Source: PGA Tour Store
need to replace it.
 New products – Titleist releases new balls and clubs every year, and every year,
people buy and test these products and they will fall in love with it. Titleist released
a game changing golf ball, the Pro V1X. Vokey Design released the SM7 this year
and the pros already have their hands on it improving their game. Scotty Cameron
now sells the Fastback 2 and Squareback 1.5, both with good models and

Financial Analysis
Below are the financial statements and key forecasts for Acushnet Holdings Corp. (GOLF).

Net Income KEY FINANCIALS

Income Statement ($Thsd)
2014 2015 2016 2017 2018 2019E 2020E

Growth Revenue 1,537,610 1,503,958 1,572,275 1,560,258 1,633,721 1,666,395 1,709,722

Cost of Sales -779,678 -728,120 -773,550 -759,466 -791,370 -649,894 -658,243
Gross Profit 757,932 775,838 798,725 800,792 842,351 1,016,501 1,051,479
EBITDA 202,593 214,721 228,374 223,368 230,800 426,597 444,528
2018 Operating Expenses -653,685 -658,255 -657,889 -634,484 -670,016 -664,892 -683,889
Operating Profit 104,247 117,583 140,836 166,308 172,335 351,609 367,590
Net Income 21,557 -996 45,012 92,114 99,872 299,951 316,299
Earnings per Share 0.30 -0.01 0.61 1.23 1.33 4.00 4.22
2017 Free Cash Flow 30,586 68,629 86,013 -45,880 131,000 288,286 304,330
Shares Outstanding 70,990 70,990 74,250 74,790 75,029 74,969 74,909
Profitability
Gross Margin 49.3% 51.6% 50.8% 51.3% 51.6% 61.0% 61.5%
2016 Operating Margin 6.8% 7.8% 9.0% 10.7% 10.5% 21.1% 21.5%
Net Margin 1.4% -0.1% 2.9% 5.9% 6.1% 18.0% 18.5%
Return of Equity (ROE) 69.5% -0.5% 5.9% 10.9% 329.4% 284.8% 171.5%
ROIC 1.3% -0.1% 2.7% 5.5% 6.0% 18.4% 19.7%
2015 Growth
Revenue Growth -2.2% 4.5% -0.8% 4.7% 2.0% 2.6%
EPS Growth -104.6% -4420.9% 103.2% 8.1% 200.6% 5.5%
Liquidity
Net Debt / EBITDA -0.12 -0.12 -0.20 -0.05 0.05 -0.12 -0.27
2014
Current Ratio 1.84 0.89 1.44 2.24 2.25 2.25 2.25
Debt to Equity 0.76 0.15 0.04 0.04 1.38 0.40 0.23
Dividend Payout Ratio 0.0% 0.0% 0.0% 38.8% 0.0% 75.0% 75.0%
-50000 50000 150000
Net Income
 Page 4 Acushnet Holdings Corp.

Figure 9: GOLF Target Price (2019)

Net Income (Thous a nd. $) 92,114 Valuation
E.P.S. 1.50 My 2019 target price is $28.5 per share for GOLF, which represents 14.5% upside from
Ta rget Mul tipl e (P/E) 19
the current share price. I arrive at my target price through the following assumptions:
Target Price (2019) 28.5
Current Pri ce 24.9  I use a target multiple of 31.8x P/E, which is the current peer’s average.
Upside Potential 14.5%
 I assume a 2019 E.P.S. of $1.50/share

Comps Table
Figure 10: Comparable Valuations
Current 10 Yr Avg
Company P/E P/E Investment Risks
Under Armour - -
Adi da s 27.5 27.1 The following are the main investment risks for Acushnet:
Ni ke 32.7 34.0
Ca l l a wa y 14.7 15.2  Pace of Game – With the upcoming generation, not many people have decided to try
Acushnet 18.7 19.7 golf. Their reason is the pace of the game. The game of golf takes too long to play and
Peers Avg 23.4 24.0 for 9 holes, it roughly takes 2 hours for 2 golfers, increasing by 15 minutes for every
additional golfer.

 Weather conditions – The weather plays a huge factor on the game. Playing golf in
extremely hot weather is a killer to play in, considering every hole you need to drink half
of a bottle of water. The rain or snow can make the courses muddy and wet, making
them unplayable until they improve.

Management & Governance

Acushnet’s C.E.O. David Maher has been leading the company since January 1 st, 2018 and
they continue to grow off of his leadership.

 Major Shareholders – Fila Korea Ltd. Owns the majority of equities with 39,345,151,
that’s 52.6% of total shareholders.

 Independence – The board of directors consists of 9 members as of 2017. There are

no red flags in the company with related party transactions, shady accounting or poor
allocation of capital.