Ever since the U.S. economy went into a tailspin, the golf industry has followed suit. Golf is not a cheap recreation and when consumers got pinched so did golf, to a certain extent. Many local golf courses struggled and shut down, and golf related businesses faced declining sales. However, golf remains a popular sport and continues to become more and more global. Businesses are taking notice, as well.

Small but Noteworthy

Last week TaylorMade, the golf equipment company owned by giant Adidas, announced that it was acquiring smaller competitor Adams Golf (Nasdaq:ADGF) for $10.80 a share. The deal price represented a 70% premium to the then trading price of Adam's shares. The deal valued Adams at $70 million. For years prior to that Adams was a tiny golf company that was struggling to make a name for itself against golf's big brand names, like Titleist, TaylorMade and Callaway.

Adams found its niche with its easier to hit hybrid clubs. Apparently TaylorMade liked what it saw and wanted to bring the company into the mold. By all accounts, TaylorMade is getting a great deal. Adams comes debt free with $18 million in cash and since TaylorMade's big focus has been on drivers, Adams hybrid technology is a welcome addition.

Golf Going Forward

Adams Golf was very appealing to TaylorMade for a variety of reasons. In similar fashion, retailer Golfsmith International Holdings (Nasdaq:GOLF) might be an interesting opportunity to a larger player. Golfsmith is the nation's largest pure play golf retailer with over 80 locations nationwide. The company has a market cap of $72 million and net debt of $40 million; annual sales are nearly $400 million. Net margins are less than 1% at the moment, but are improving, and have a huge impact on earnings relative to value, given the company's sales.

Callaway Golf (NYSE:ELY) remains as the last pure play golf equipment company that is not owned by a bigger company. Acushnet, owner of the Titleist and Foot Joy brands, was once part of the conglomerate Fortune Brands, but was sold off to Fila of Korea. So Callaway finds itself not only competing with other golf equipment companies, but the deeper pockets of the parent holding companies. The company has a market cap of $440 million cash, a clean balance sheet with $43 million and no debt.

The Bottom Line

The future of golf became all the brighter when shipping giant FedEx (NYSE:FDX), sponsor of the yearly professional golf playoff system known as the FedEx cup, signed with the PGA Tour for another five year sponsorship, through 2017. The enthusiasm for golf continues to grow around the world and the future looks bright, as more youngsters are drawn to the game. Thats great for golf, its players, fans and golf business.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Sham Gad did not own shares in any of the companies mentioned in this article.
Related Articles
  1. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  2. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  3. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  4. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  7. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  8. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  9. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  10. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Fast Fashion

    Definition of "fast fashion."
  3. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  4. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  5. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  6. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!