Winnebago Industries, Inc. (WGO) manufactures and sells recreation vehicles (RVs) and marine products primarily for leisure travel and outdoor recreation activities. On the other hand, Thor Industries, Inc. (THO) also is engaged in designing, manufacturing, and selling RVs and related parts and accessories.
Demand for RVs reached record highs in the first half of the year, mainly driven by people’s active interest in camping and offbeat recreational travels. Moreover, the U.S. tax code treating RVs as second homes, providing owners tax advantage on RV purchase loans, the sales of these vehicles are on the rise.
The pandemic fueled the demand for RVs and RV rentals last year, as RVs offer a self-contained way to travel. As the vaccination progresses rapidly and people are once again engaging in outdoor activities and recreational travels, RV sales are expected to soar in the upcoming months. The RV market is expected to reach $48 billion by 2026, registering a CAGR of 7% during 2021-2026. Therefore, RV stocks WGO and THO should benefit.
WGO has slumped 0.9% over the past six months, while THO has lost 7.5%. In terms of the past year’s performance, WGO is the winner with 45.6% gains versus THO’s 26.7%. However, THO’s 36.1% gains year-to-date compares with WGO’s 31.1% returns.
But which stock is a better buy now? Let’s find out.
On August 31, WGO announced the acquisition of Barletta Pontoon Boats, the industry’s fastest-growing, premium pontoon boat manufacturer. “This acquisition of Barletta extends Winnebago Industries’ marine platform into one of the fastest-growing boating segments, advances our ongoing evolution into a premier outdoor lifestyle company, and is expected to drive significant financial accretion,” commented Michael Happe, Winnebago Industries President, and Chief Executive Officer.
On September 1, THO announced the acquisition of Wichita, Kansas-based AirX Intermediate, Inc., a leading supplier of aftermarket RV parts and accessories. This acquisition is expected to strengthen THO’s supply chain while also diversifying its revenue streams.
Recent Financial Results
WGO’s net revenues increased 138.7% year-over-year to $960.74 million in the fiscal third quarter ended May 29. Gross profit stood at $169.61 million, up 429.6% from the same period last year. Net income grew 677.2% from the year-ago loss to $71.30 million. The company’s EPS increased 654.1% year-over-year to $2.05.
For the fourth quarter ended July 31, THO’s net sales increased 54.6% year-over-year to $3.59 billion. Its gross profit grew 71.6% from its year-ago value to $595.96 million. Net income attributable to THO improved 93.2% from the same period last year to $230.28 million. The company’s EPS improved 92.5% year-over-year to $4.12.
Past and Expected Financial Performance
WGO’s revenues and EBITDA grew at CAGRs of 19.8% and 31.1% over the past three years, respectively. Analysts expect WGO’s revenue to increase 29.9% in the current quarter, 50.5% in the current year, and 9.5% in the following year. The company’s EPS is expected to grow 38.6% in the current quarter, 208.5% in the current year, and 3.4% in the next year. Moreover, its EPS is expected to grow 15% per annum over the next five years.
On the other hand, THO’s revenues and EBITDA grew at CAGRs of 13.9% and 16.2% over the past three years, respectively. Analysts expect the company’s revenue to increase 14.4% in the current year and 2.8% in the next year. The company’s EPS is expected to grow 52.7% in the current quarter, 8% in the current year, and 2.4% in the following year. Moreover, THO’s EPS is expected to grow 160% per annum over the next five years.
WGO is more profitable with a gross profit margin and EBITDA margin of 17.63% and 11.84%, compared to THO’s 15.38% and 9.24%, respectively.
Furthermore, WGO’s ROE, ROA, and ROTC of 26.77%, 12.90%, and 15.92% compare with THO’s 24.97%, 9.13%, and 13.11%, respectively.
Thus, WGO is more profitable here.
In terms of forward EV/Sales, WGO is currently trading at 0.78x, 25.6% higher than THO, which is currently trading at 0.58x. Also, WGO’s forward EV/EBITDA ratio of 6.62 is 2.6% higher than THO’s 6.45.
Thus, THO is relatively affordable here.
Both the stocks have an overall rating of C, which equates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Both the stocks have a Momentum grade of C, justified as they are trading above their respective 50-Day moving averages.
WGO has a grade of B for Quality. WGO’s net income margin of 7.21% is 14.7% higher than the industry average of 6.29%. On the other hand, THO has a grade of C for Quality. This is justified as THO’s net income margin of 5.36% is 14.8% lower than the industry average.
Of the 63 stocks in the Auto & Vehicle Manufacturers industry, WGO is ranked #17, while THO is ranked #19.
The RV industry’s prospects look bright as the vaccination drive is rapidly progressing and people are gaining the confidence to engage in recreational travels. Both the stocks have reported strong financials in the recent quarter, but none of them appear to be a good bet now, given their weaker-than-industry financials. Thus, it could be wise to wait for better entry points.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Auto & Vehicle Manufacturers industry here.
Want More Great Investing Ideas?
THO shares were unchanged in after-hours trading Wednesday. Year-to-date, THO has gained 31.35%, versus a 17.46% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|THO||Get Rating||Get Rating||Get Rating|
|WGO||Get Rating||Get Rating||Get Rating|