This company, which primarily designs and manufactures towable (mainly) and motorized trailers, has been grouped recreational vehicles sector in sport& recreation vehicle industry.
It seems that the demand for towable trailer provided by companies in this sector has been very strong and kept increasing in the past several years as indicated by the average annual growth of about 16% in wholesales shipment and average annual growth of 11% in retail units. The demand for motorized trailers seems not to be as fast as it is for towable but presents a similar trend as it is in towable trailers sector. The growth in sale volume in towable trailers seems to come mainly from smaller and lower price products at the beginning but has presented a strong signal that the demand is expanding into higher price products. The growth in manufacture’s sale has been supported by the sales in retailers. However, it seems that the major driver of growth in retail has shifted from same store sales to new opened store sales. Therefore, it may mean that the undeveloped market or potential consumers are becoming smaller and a signal that the growth in sales may slow down soon.
Strong growth in revenue helps companies improve their profitability. But the increasing raw materials cost that the component suppliers and manufacturers are causing huge pressure on the profitability of the whole industry. The typical gross margin is about 22%, 15% and 29% for supplier, manufacturers, and dealers in 2018. With a SG&A as percentage of sales of 13%, 6%, and 21% respectively the operating margin is about 9%, 9%, and 8% in 2018. The typical enterprise price/EBI ratio is 18,12, and 16 for component supplies, manufacturers, and dealers.
It seems that the demand for both towable and motorized vehicles of this company has been strong and growing in the past two-three years as indicated by the increase in sales volume of related products. The growth in demand seems to be accelerating as indicated by the fact that the growth in sale volume has shifted gradually from lower price products to higher price in both two categories of products.
The first nine months of fiscal 2018 compared with the same period of 2017 (ended March 31 2018)
Recreational vehicles revenue increased about 22% attributable to increase of 16% in motorized products revenue (volume increased by 15% and price/mix increased 1%) and increase of about 24% in sales of towable products ( increase of 20% in volume and increase of 4% in selling price/product mix).
Fiscal 2017 compared with fiscal 2016
Organic revenue increased about 18% attributable to increase of 29% in motorized products (volume increased by 35% and price/mix increased 5.5%) and increase of about 16%
in sales of towable products ( increase of 20% in volume offset by decrease of 4% in selling price/product mix).
Fiscal 2016 compared with fiscal 2015
Organic revenue increased about 8% attributable to increase of 23% in motorized products (volume increased by 24% offset by decreased 1.5% in price/mix) and increase of about 6%
in sales of towable products ( increase of 10% in volume offset by decrease of 4% in selling price/product mix).
Its gross margin was basically flat at around 14% in 2018 due to combining impact of changes in price and increase in volume. With the flat SG&A as percentage of sales (at about 6%), we see a flat operating margin (at 8%in 2018). Its average EBI/share increased largely since 2015.
Stock performance
This company is having an enterprise price/EBI ratio of 12. We think that its stock is being relatively slightly undervalued compared with its peers Winnebago Industries, Inc.
