Company Overview: Winnebago Industries, Inc. (NYSE: WGO) is one of North America’s leading Recreation Vehicle (RV) and marine products manufacturers with a diversified portfolio mainly used in leisure travel and outdoor recreational activities.

­­­­­­WGO Details

Historical Financial Trend:

WGO illustrated a substantial increase in net sales in FY21 while diversifying its portfolio into the marine segment. The operating revenues have been growing since FY19 with consistent growth in net income. Operating revenues grew at a 23.8% CAGR (FY17 – FY21).

Second Quarter FY22 Performance:

Top 10 Shareholders:

The top 10 shareholders together form ~54.06% of the total shareholding. BlackRock Institutional Trust Company, N.A. and The Vanguard Group, Inc. hold a maximum stake in the company at ~­­­15.71% and ~8.57%, respectively.                  

Key Metrics:

Net Revenue has gained substantial inflows, considering the increased market share and trending demand for RVs. Despite supply chain disruption and cost inflation, the gross margins have stood stable to support the bottom line. The liquidity profile has improved since FY19, as illustrated by the increasing current ratio.

Outlook:

Key Risks:

The RV and marine industries continue to encounter supply chain constraints, including supply shortages, material & component cost inflation, and shipping delays. These factors have affected WGO’s ability to increase production and meet existing demand.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Stock Recommendation:

The stock of WGO has been corrected by ~29.97% in the past one year. The stock is currently trading lower than the 52-weeks average price level band of $43.05 - $80.30, manifesting an accumulation opportunity. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Considering the rising consumer demand, integrated acquisitions, and organic growth, the company might trade at a slight premium to its peers’ EV/Sales multiple median. For valuation, a few peers like Ford Motor Co (NYSE: F), Thor Industries Inc (NYSE: THO), General Motors Co (NYSE: GM), and others have been considered. Given the upward trending financial performance, scalability benefits, improved market share, current trading levels, and upside indicated by valuation, we give a “Buy” recommendation on the stock at the closing market price of $49.96, up by ~4.11% as of 06 June 2022.

Markets are currently trading in a highly volatile zone due to prevailing macroeconomic and geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

WGO Daily Technical Chart (Source: REFINITIV)

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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