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Time to Buy Winnebago Industries After Q3 Beat?

Outdoor lifestyle product manufacturer Winnebago (WGO) recently reported impressive third-quarter financials, surpassing the consensus estimates. However, is it wise to buy the dip in stock amid ongoing supply chain disruptions? Let’s find out…

Winnebago Industries, Inc. (WGO) manufactures and sells recreation vehicles and marine products primarily for leisure travel and outdoor recreation activities. The stock has lost 35.2% year-to-date to close yesterday’s trading session at $48.56. In addition, it is currently trading 39.5% below its 52-week high of $80.30, which it hit on October 4, 2021.

However, WGO reported solid third-quarter results, as revenue and adjusted EPS for the quarter beat the Wall Street estimates by 21.1% and 37.2%, respectively. Also, its Board of Directors recently paid a quarterly cash dividend of $0.18 per share, representing a 50% year-over-year increase. Moreover, it executed record share buybacks of $70 million during the third quarter. So, the stock’s near-term prospects look bright.

Here’s what I think could influence WGO’s performance in the upcoming months:

Robust Financials

WGO’s net revenues increased 51.8% year-over-year to $1.50 billion in the third quarter, which ended May 28, 2022. The company’s adjusted EBITDA grew 74.7% year-over-year to $191.70 million, while its net income came in at $117.22 million, representing a 64.4% year-over-year increase. Also, its adjusted EPS came in at $4.13, up 84.4% year-over-year.

Favorable Analyst Estimates

For fiscal 2022, analysts expect WGO’s EPS and revenue to grow 59.1% and 36.4% year-over-year to $13.60 and $4.95 billion, respectively. In addition, its EPS is expected to grow at 15% per annum over the next five years. Moreover, Wall Street analysts expect the stock to hit $63.43 in the near term, indicating a potential upside of 30.6%.

Stretched Valuation

In terms of forward EV/EBIT, WGO’s 3.18x is 71.7% lower than the industry average of 11.22x. Likewise, its forward non-GAAP P/E of 3.58x is 67.4% lower than the industry average of 10.98x. Moreover, the stock’s forward P/S of 0.31x is 61.2% lower than the industry average of 0.80x.

High Profitability

In terms of trailing-12-month ROTC, WGO’s 21.22% is 197.5% higher than the industry average of 7.13%. Likewise, its trailing-12-month ROTA of 16.16% is 191.5% higher than the industry average of 5.54%. Moreover, the stock’s trailing-12-month asset turnover ratio of 2.19% is 114.1% higher than the industry average of 1.02%.

POWR Ratings Show Promise

WGO has an overall rating of B, which equates to a Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. Out of these categories, WGO has an A grade for Value, in sync with its lower-than-industry valuation ratios.

WGO also has a B grade for Growth, consistent with its revenue and earnings growth estimates.

Beyond what I have stated above, we have also given WGO grades for Momentum, Stability, Quality, and Sentiment. Get all the WGO ratings here.

WGO is ranked #13 out of 66 stocks in the Auto & Vehicle Manufacturers industry.

Bottom Line

WGO reported impressive fiscal third-quarter results despite semiconductor shortages and supply chain challenges. It is well-positioned to benefit from the strong decarbonization demand and governments’ progressive policies. So, it could be wise to buy the dip in the stock.

How Does Winnebago Industries, Inc. (WGO) Stack Up Against its Peers?

WGO has an overall POWR Rating of B. You could also check out these other stocks within the Auto & Vehicle Manufacturers industry with an A (Strong Buy) or a B (Buy) rating: Daimler AG (DDAIF), Honda Motor Company, Ltd. (HMC), and Mazda Motor Corporation (MZDAY).

WGO shares were trading at $49.10 per share on Friday afternoon, up $0.54 (+1.11%). Year-to-date, WGO has declined -33.86%, versus a -19.92% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.


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