WGO Winnebago Industries, Inc

Sector financial performance:

This company, which primarily designs and manufactures recreational vehicles for leisure travel and outdoor recreation activities including motorhome and towable trailers, has been grouped into recreational vehicles sector in sport& recreation vehicles industry.
It seems that the demand for traditional toys provided by companies in this sector has been declining (excluding effect of toys “R” us) in matured markets. However, demand for value-added toys, including those using high technology and popular story related brands, seems to be stable. Emerging market may present one of options for these toys’ companies to maintain their growth.
While it may not significant for Toys “R” us’ liquidation to impact companies’ sales, it already causes direct impact on many companies’ profit margin in 2017 and 2018. The typical gross margin is about 37% and with a SG&A as percentage of sales of 39% the operating margin is about -3% in 2018. The typical enterprise price/sales ratio is 1.6.

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Company performance:

It seems that the demand for towable trailers of this company has been strong and increasing fast in the past two-three years as indicated by the increase in sales volume of related products (before acquisition). The fast growth has been offset partially by declining average price probably because the increase in sales volume may be attributable to lower and smaller trailers. The demand for motorized products seems to be far behind the industry average of performance and the average price seems to be declining due to shifting in product/mix.
The first nine months of fiscal 2018 compared with the same period of 2017 (ended May 26 2018)
Revenue increased about 36% due to acquisition and increase in sales volume of towable products.
Fiscal 2017 compared with fiscal 2016
Organic revenue increased about 1.2% due to organic increase of about 40%
in sales of towable products ( increase in volume offset by decrease in selling price/product mix) offset  by decrease of about 3% in motorized products (decrease in selling price/products mix).
Fiscal 2016 compared with fiscal 2015
Organic revenue was basically flat attributable to decrease of 2% in motorized products (volume increased by 2.3% offset by decrease of 1.8% in price/mix) and increase of about 25%
in sales of towable products ( increase of 57% in volume offset by decrease of 8.5% in selling price/product mix).
Its gross margin went up from about 11% to 16% in 2018 due to shifting of product/mix to higher margin towable products and leveraging of increasing revenue. With the increased SG&A as percentage of sales (up from 5% to 6%), we see a significant increase in its operating margin (up to 9.5% in 2018). Its average EBI/share increased significantly during the same period.

Stock performance

This company is having an enterprise price/EBI ratio of 13. We think that its stock is being relatively slightly overvalued compared with its peers THOR INDUSTRIES, INC.

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