Amer Sports Inc., the company behind renowned sports brands like Arc'teryx, Salomon, Wilson, and Louisville Slugger, is navigating a turbulent sea of profitability challenges. Recent financials paint a picture of struggle, with a significant net loss and a mountain of debt. However, a closer look reveals a glimmer of hope, a hidden metric that could rewrite the narrative: Amer Sports' positive free cash flow.

There's no sugarcoating it – Amer Sports' recent financial performance has been rough. A net loss of $208.6 million for the fiscal year ending September 2023 is a stark reality. The company is grappling with a massive $5.8 billion debt burden, a figure that significantly overshadows its market cap. Analysts attribute these struggles to declining consumer spending and a volatile global economy.

But amidst the losses and debt, a potent metric emerges: Amer Sports' free cash flow. While net income tells a story of struggle, free cash flow offers a different perspective. Despite the net loss, Amer Sports generated $47.2 million in free cash flow in fiscal year 2023. This positive trend follows similar successes in 2020 and 2021, with $191.1 million and $169.1 million generated, respectively.

Positive free cash flow is vital, especially for a company facing Amer Sports' challenges. Here's why:

Debt Management: This steady cash flow provides much-needed resources to manage those hefty debt obligations. It offers breathing room and flexibility, even as refinancing remains a challenge.

Investment Fuel: Free cash flow can be reinvested to ignite growth. Imagine Amer Sports making strategic acquisitions of smaller, innovative competitors or bolstering its direct-to-consumer online presence.

Investor Beacon: In a sea of red ink, positive free cash flow is a beacon for investors. It signals underlying strength and hints at a potential path back to profitability.

A bold question arises: Could Amer Sports, despite its debt, become an attractive acquisition target? The company boasts strong brands, a global footprint, and that vital positive free cash flow. Private equity firms or larger industry players might see an opportunity to restructure the debt, streamline operations, and unlock the true potential hidden within those positive cash flow numbers.

Don't write off Amer Sports just yet. While the headlines may focus on the losses, a deeper dive reveals a company with potential turnaround capabilities. The key lies in leveraging its positive free cash flow to navigate current obstacles and drive future growth. The coming quarters will be telling, but this "hidden metric" suggests that the Amer Sports story is far from over.

Wilson, owned by Amer Sports, has provided the official basketballs for the NBA since 1983.

Arc'teryx, known for its high-performance outerwear, was originally named "Rock Solid."