Sportsman’s Warehouse (SPWH) reported decent earnings last night, but it’s taken the market some time to get over its initial disappointment in same-store sales. Still, bad news is already baked in here as we knew firearms sales were weak on a year-over-year basis and shares have rebounded off their morning lows.

The real story here is that earnings beat forecasts by 5% and net sales expanded by 4% on minimal new store builds. Previous estimates supported SPWH at $8 in the last few months, so there is now some extra room in the multiples to continue moving higher. Management is clearly working to boost efficiencies of scale, so as attention shifts from the gun side of the business, there is still upside potential for growth, as well as extra value.

At these levels, SPWH is trading at a forward P/E of 10.8 – a multiple based on old earnings estimates that we now know were 5% too low. Continue to hold the shares as I believe we’ll see momentum return to the name.