Investidea: Thor Industries, because the house is on wheels

Инвестидея: Thor Industries, потому что дом на колесах

Today we have a speculative idea: take shares in motorhome manufacturer Thor Industries (NYSE: THO), to capitalize on the growth of his business.

Growth potential and validity: 19,5% behind 16 months excluding dividends; 45% behind 3 years excluding dividends; 74% behind 8 years excluding dividends.

Why stocks can go up: because the company's products are in demand.

How do we act: we take shares on 83,38 $.

When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.

No guarantees

Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.

And what is there with the author's forecasts

Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.

So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark. As with the investment idea in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.

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What the company makes money on

Thor manufactures motorhomes for recreation and living. What do her products look like?, can be viewed on her website.. According to the company's annual report, her earnings are divided as follows.

Towed products in North America — 50,5%. Segment gross margin — 16,4% from its proceeds. Pre-tax segment margin — 10,6% from its proceeds. Trailers for travel are 60,9% segment revenue, and 39,1% - houses on a trailer, they are also called "fifth wheel".

Motorized products in North America — 21,7%. Segment gross margin — 13% from its proceeds. Pre-tax segment margin — 7,6% from its proceeds. By type of goods, segment revenue is divided as follows:: class A products, big cars - 39,4%; class C, small - 47%; class B, medium - 13,2%.

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Sales of the company's products in Europe — 26%. Segment gross margin — 13,8% from its proceeds. Pre-tax segment margin — 3,6% from its proceeds. By type of goods, segment revenue is divided as follows:: motor caravan - 55,6%, hiking trucks - 24,4%, small trailers - 9,1% and other - 10,9%.

Other — 1,8%. These are non-core businesses of the company: Roadpass app and postle aluminum business. Segment gross margin — 23,4% from its proceeds. Pre-tax segment margin — 15,5% from its proceeds.

Arguments in favor of the company

Fell down. The company's shares have fallen sharply this year.: from 145 to 83,38 $. And in general, now the company is even cheaper, than in 2017, although its financial performance has grown substantially since then. I believe, that only with this in mind we have reason to expect a rebound.

Инвестидея: Thor Industries, потому что дом на колесах

Инвестидея: Thor Industries, потому что дом на колесах

Go! As in the case of Winnebago, in the long term, we can expect an increase in demand for the company's products both from those, who wants to travel, as well as from those, who is going to live in mobile homes. Actually, according to Thor's financials, you might have noticed, that things are going well for her.

Inexpensive. The company is cheap: P / E — 5,97, P / S about 0,4, its capitalization is 4.69 billion dollars. This is also quite an argument for many investors..

Can buy. Considering all of the above, the company may well be bought.

Dividends. The company pays 1,72 $ per share per year - this gives 2,03% per annum. That's not a lot, but still a good amount.. Considering, that the company spends about 15% from her annual profit, and also then, that her quotes are marking time last 5 years for no good reason, Thor could be the target of an activist investor attack. It seems to me, a die-hard activist investor may well demand and receive a doubling of payouts. Such an activist may also demand the sale of the company.: it does not interfere.

What can get in the way

And if the crisis. Thor makes products, without which consumers can do without. So if a real economic crisis begins., then sales of its products may fall.

A ghost haunts Europe. A significant part of the company's revenue comes from the Old World - and known events may negatively affect its sales.

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Accounting. The company has 4.83 billion dollars of debt, of which 2.036 billion must be repaid within a year. Not much money at the disposal of the company: 339,237 million on accounts plus 1.165 billion debts of counterparties, - so I would expect, that the amount of debt will grow.

This will repel some investors due to higher rates and more expensive loans.. It also reduces the likelihood of a Thor dividend increase.. And increases the likelihood of their cutting, which can lead to price drops.

Everything else. So far, the company's margins have not yet begun to suffer., but sooner or later problems with the cost of raw materials, workforce and traffic will begin to affect its reporting. The company's net margin is less 6% from proceeds, so you should be prepared for a worsening situation with profits.

What's the bottom line?

Shares can be taken now by 83,38 $. And then there are several options:

  1. keep up 100 $, who asked for shares at the beginning of this year. Think, be prepared to wait here 16 Months;
  2. keep up 121 $. It's better to focus on the deadline here 3 of the year;
  3. wait for the return to the level 145 $ and receive dividends, while we wait. Here you should be prepared to wait 8 years.

You should also look at the news section of the company's website: if suddenly there will be news about cuts in payments, then, maybe, will be able to sell shares on the St. Petersburg Exchange before, how they will fall.

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