Cadre Holdings is a prominent supplier of essential gear utilized by police officers and public safety professionals, such as bulletproof vests, radios, handcuffs, and holsters. Despite facing financial setbacks in the recent past, this could be an excellent time to invest in the company.
Recently, technical factors have presented an opportunity to invest, with the company’s shares being on a losing streak. One such factor causing the dip is the secondary offering that increased the supply of shares actively trading. This occurrence could have short-term adverse effects on the stock prices and is not related to the company’s business fundamentals.
Cadre Holdings’ shares went public at $13 each in late 2021. After a sequence of good quarters and two acquisitions, the shares surged to $28 last June. However, the secondary offering at $23.50 led to a fall in stock prices to around $19.
Despite these fluctuations, it is worth considering investing in Cadre. Its shares have witnessed significant gains lately. For example, following Cadre’s recommended buying time in November, the prices soared by 60%, reaching the low $30s.
Unfortunately, they have since declined to around $21, including an 11% drop after the announcement of another follow-on offering this month. The follow-on offering’s price is at $19 per share, impacting short-term trading and providing an opportunity to invest in Cadre’s long-term growth.
Cadre’s Prospects Remain Strong Despite CEO’s Share Sale
Cadre, a leading provider of tactical gear to law enforcement agencies, recently saw its Chairman and CEO Warren Kanders sell 1.7 million shares of the company. According to Kanders, this sale was made purely for personal financial diversification reasons and was not a reflection of his confidence in Cadre’s prospects. As of now, Kanders still owns 37% of the company’s shares.
Last year, Cadre made a secondary offering of 2.6 million shares which brought in $54 million for the company. The latest share sale by Kanders did not result in any proceeds for Cadre nor did it lead to any dilution of shares for the company’s shareholders.
Despite recent developments, Cadre is well-positioned to benefit from structural trends in the law enforcement sector. While there is talk of “defunding” the police, funding for law enforcement is actually on the rise nationwide, with many departments adding more officers. This translates into greater demand for Cadre’s products, which are tailored to meet the unique needs of law enforcement agencies.
Cadre boasts that 80% of its sales come from products with five-to-10 year replacement cycles. These products typically exhibit low economic sensitivity and have a niche customer base within the federal and public safety sectors. With relationships already established with over 23,000 agencies and departments, Cadre has a strong track record of acquiring makers of complementary products that enhance its offerings.
Overall, despite the recent share sale by Kanders, Cadre remains optimistic about its long-term growth prospects and will continue to position itself strategically within the law enforcement sector.
Cadre’s Management Offers Sales Boost and Financial Growth
According to the management guidance, Cadre’s sales are expected to increase up to 8% this year. The analysts also predict that the net income will increase fourfold. The company’s net debt has decreased to $98 million from $160 million a year ago. This significant decrease is a positive sign for the company, giving it more room to pursue acquisitions after a year of sitting out.
Analysts have a positive view of Cadre, and the average price target is $30, which is up by 43% from the current levels. Furthermore, the stock carries a dividend yield of 1.5%, which can be an added attraction for investors.