Today we have a speculative idea: take shares in motorhome maker Winnebago Industries (NYSE: WGO), in order to capitalize on the growth in demand for his goods.
Growth potential and validity: 15% per year excluding dividends; 32,5% behind 3 years excluding dividends; 11% per year for 10 years including dividends.
Why stocks can go up: because the demand for motorhomes is very high and will remain at this level.
How do we act: we take shares now by 61,93 $.
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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Investment editorial office
Starting a company earns
WGO makes motorhomes, designed for life and travel.
According to the company's annual report, its revenue is divided into two segments:
- Towed products — 55,37%. What does it look like, can be viewed on the company's website.. Segment Adjusted EBITDA margin - 14,37% from its proceeds.
- Motorhomes - 44,63%. Segment Adjusted EBITDA margin - 10,99% from its proceeds.
In both segments, sales of spare parts are also calculated., components and services for equipment of the corresponding kind. Lack of detail - how much goods give, how many parts and how much maintenance is the weak side of the company's report.
Geographically, the company's revenues are distributed as follows: 93,95% revenue the company makes in the US, 6,05% - In others, unnamed countries.
Arguments in favor of the company
Fell down. Since May 2021, the company's shares have fallen sharply: from 84.54 to 61,93 $. Means, we can take stock in anticipation of a rebound.
Steppe Yankees. Recreational vehicle ownership is growing in popularity in America, where you can live: 11,2 million US households own such vehicles - this is 26% more, how 10 years ago. And another 9.6 million households are thinking about buying such equipment in the coming years. 5 years.
Part of the point here is, that the pandemic and the accompanying changes are allowing many to work remotely, and in conditions of extreme instability of international flights, it is logical to engage in domestic tourism. Given the development of tourism infrastructure within the United States, moving around in “home buses” is a good idea. And these trends are reflected in the financial performance of the company..
Also, it seems to me, insane house prices in the usa make normal, a stationary house of luxury for poor people. This will encourage more and more people to live in vehicles - as in the book and film "Land of Nomads". So the company's long-term outlook looks very positive..
Clean accounting. The company has 1.047 billion debts, of which 427.103 million must be repaid during the year. WGO has enough money to close urgent debts: 211,384 million on accounts and 263.677 million debts of counterparties. It's good: if the company's debt was too large relative to its cash reserves, then this would become a problem due to the upcoming rise in the cost of loans.
Cheap. The company is very inexpensive. P / S she has 0,58, P / E — 6,72. Its capitalization is only 2.11 billion. This makes its shares very attractive to those, who is tired of the high cost of the American market.
"Yabkupil". According to the annual report, WGO occupies 12,5% from your market. Considering this, as well as all of the above, I wouldn't be surprised, having learned, that a company wants to buy some large industrial or automotive conglomerate.
What can get in the way
Dividends. The company pays 0,68 $ per share per year, what gives 1,14% per annum. Payouts are only 8,21% from annual profit. The company is actively investing in the development and expansion of its own business, for example, recently bought a boat manufacturer. Therefore, I would not expect a tangible increase in payments - although I would be happy to be wrong.
This is arrogance. The company produces, frankly,, not the most necessary products in life, so its sales may drop, especially since these products are not cheap: a WGO motorhome costs between $102,000 and $480,000, and "trailer" houses are in the range of 35-61 thousand. This, however, Soothes: the rich and upper middle class in America are doing great - against the backdrop of a pandemic and a recession in 2020, they have significantly increased consumption in the spirit of the "Three Fat Men". So that, maybe, recession and will not greatly spoil the company's sales.
Everything else. Rising cost of raw materials, logistics and labor will not have the best effect on the company's reporting, and it needs to be understood and accepted.
What's the bottom line?
We take shares now by 61,93 $. And then we have the following options:
- wait for growth until 72 $. Think, we will reach this level in the next 12 Months;
- hold until the stock returns to the level 84 $. Think, be prepared to wait here 3 of the year;
- keep shares next 10 years, while the company's business is growing.
