Leatt Corp (LEAT) stock intrinsic value fair value estimate & owner earnings analysis

Leatt Corporation designs and sells protective gear for motorsport and leisure riders: the Leatt neck brace (its original product), body armor, helmets, boots, goggles and apparel for motocross, mountain biking and similar sports. Products are made in Asia (mostly China) and sold through dealers and distributors; 72% of 2025 revenue ($44.6M of $61.9M) came from customers outside the United States. Revenue was $62M in 2025, up from $44M in 2024. How we measured earnings. We estimate what the business generates for owners after stripping out swings in receivables, inventory and payables, after deducting stock compensation as a real cost, and after deducting only the capital spending needed to maintain the business. On that basis owner earnings per share were: 2018 $0.22, 2019 $0.23, 2020 $0.63, 2021 $2.31, 2022 $1.69, 2023 $(0.03), 2024 $(0.41), 2025 $0.67. The pattern is a pandemic-era demand surge in 2021-22 (revenue doubled to $72-76M), followed by a customer destocking and a loss-making 2024, then a recovery in 2025. We used 2018-2025 as one full cycle and took the median, about $0.43 per share (roughly $2.8M a year). The 2021-22 peak and the 2023-24 trough roughly offset in that median; we did not use the latest twelve months. The first half of 2026 (revenue $35.9M, net income $2.7M, both above the first half of 2025) is consistent with that level and does not by itself justify raising it. Growth. Owner earnings rose from a loss in 2024 to $0.67 in 2025, but growth from a trough is a return toward normal, not a trend to extrapolate, so year-one growth in the base case is zero. We credit no growth in any case: new products, market share and international expansion are not backed by a contract or a many-year proven mechanism we can point to. The customer base is also concentrated: the filing states a significant portion of revenue comes from a limited number of customers. What persists. There is 15+ years of continuous operation with revenue never below $16M, and an established brand in a niche where safety is a purchase reason. We therefore let the earning level continue for a long stretch but do not assume it lasts forever; it is worth nothing after the period stated. Bear case ($0.75 per share). Tariffs on China-made goods (a risk the filing flags, though it reports no significant effect through 2025) and customer concentration keep results near the weak 2023-24 level: roughly $0.10 per share a year for ten years, then fading to zero. This is the level of the sub-par years already reported, not a catastrophe. Base case ($5.00 per share). Owner earnings of about $0.43 per share, no growth, sustained for about 20 years and then worth nothing beyond that. Bull case ($8.50 per share). The 2025 result of about $0.67 per share proves to be the sustained level, no growth, for about 25 years. Profit in the first half of 2026 supports this but two half-years are not enough to move the base level. Accounting notes. Stock compensation ($0.5M in 2025) is deducted. The company holds about $13M in cash; this is not added separately because interest on it is already in operating cash flow and no net debt exists to deduct. Depreciation is small ($1.3M) and there is no material acquired-intangibles amortization, so we treated the earning level as not overstated by wasting assets. Cash flow in 2023 was inflated by receivable and inventory release and by a $3.4M drop in taxes payable; both are working-capital swings we removed. Owner earnings for 2016-2017 and some line items in 2018-2020 were rebuilt from net income, depreciation and other non-cash items because some working-capital tags in the filings were incomplete; this reconciled to reported cash flow within rounding for 2019-2025. Margin-of-safety price. The margin-of-safety price is about $2.60 per share, roughly half our base value, because the business is small, has swung from strong profit to losses in three years, depends on a few large customers and on China-based manufacturing, and its bear case is thin. The main things that would make this analysis wrong: a sustained loss of key customers or a tariff shock the company cannot pass on (lower), or the 2021-22 demand proving to be a new normal rather than a surge (higher).