Thor Industries Inc.

Thor Industries Inc. (NYSE – THO) produces a variety of recreational vehicles in the United States and distributes them, as well as associated components and accessories, mostly in the United States and Canada. North American Towable Recreational Vehicles, North American Motorized Recreational Vehicles, and European Recreational Vehicles are the company's three notifiable segments.

Latest news

• Insider’s share purchases: James Ziemer, Independent director, purchased shares worth approximately USD 805k at an average price of USD 80.53. Over the last year, the biggest purchase was by Chairman Emeritus Peter Orthwein for USD 1.0m worth of shares, at about USD 103 per share. Thor Industries has big stakes of large institutions such as Vanguard group (9.41%) and Blackrock Fund Advisors (7.66%) to name a few.
• Thor Industries Inc., America’s Most Trusted Companies 2022: Newsweek and Statista Inc. have named Thor Industries Inc. as the most trusted company in 2022. This award is given considering three critical factors customer, investor, and employee trust.

Q2 FY22 financial results

• Robust financials result for the Q2 FY2022: In the second quarter of fiscal 2022, net sales were USD 3.88 billion, up 42.1% over the second quarter of fiscal 2021. For the second quarter, the consolidated gross profit margin was 17.4%, up 220 basis points YoY.
• Strong fundamentals and margins: Earnings per share for the second quarter were USD 4.79 per diluted share, up 101.3 percent from USD 2.38 per diluted share in the preceding fiscal year's second quarter. In comparison to the RV backlog as of January 31, 2021, the Consolidated RV backlog as of January 31, 2022, was USD 7.73 billion, an increase of almost 60%.
• Up trending dividend per share graph: Thor Industries’ quarterly dividend per share graph has been in an uptrend since FY18, which can also be seen in the graph below.

Source: Company filing

Key Risk

• Risk of slippage in Quality or margins: Thor Industries Inc. operates in an industry where nearly every RV the company and its rivals make sells rapidly. It's easy to slip into the trap of overproduction in this circumstance.
• Marco economic factors: Current macro-economic factors such as inflation and the Russia-Ukraine conflict has affected all the sector of the economy. Failure to pass on rising raw materials can have worse effects on profitability and operational margins.

Outlook

For 2022 and beyond, there is still a lot of optimism regarding the RV industry's future. According to the RV Industry Association, total North American wholesale RV shipments will most likely number 591,100 units. Even considering recent macroeconomic and geopolitical developments, such as Russia's invasion of Ukraine, which have combined to produce a litany of difficulties that might influence almost every company's performance in the short term, Thor Industries Inc.'s long-term prognosis remains quite favorable. Even if the macro factors finally lead to a slump, the firm is projected to outperform the market, as it has done in every downturn since 1980.

Valuation Methodology – EV/EBITDA value multiple-based relative valuation

Source: REFINITIV, Analysis by Kalkine Group

Technical analysis

The price of Thor Industries Inc. has been in a downward channel since October 2021 which can be seen in the graph below. The gap between the channel is closing meaning possibilities of an upside breakout soon. Price is currently trading around 1.68 Fibonacci level, which means profit booking for the sellers. The weekly time frame shows strong resistance around the USD 70-75 range. Price tried moving up but around USD 85 got rejected from the upper trend line as well short-term (50-day) SMA.

Technical chart (as of April 27, 2022, at 12:05 PM PDT). Source: REFINITIV, Analysis by Kalkine Group

Stock recommendation

Thor Technologies Inc.’s stock price has been in a downward channel since October last year and has fallen 40.45% and is currently at the lowest end of its 52-week range of USD 74.06 to USD 149.38. We have valued the stock using the EV/EBITDA value-based relative valuation methodology and arrived at a target price of USD 101.32.

Considering the significant correction in the stock price, strong fundamentals, technical analysis, associated risks, and current valuation. We recommend a "Buy" rating on the stock at the current price of USD 75.83, up 0.44% as of April 27, 2022, at 12:05 PM PDT.

Technical analysis summary

*Current price as of April 27, 2022, at 12:05 PM PDT

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Technical Indicators Defined: -

Support: A level where-in the 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 the stock prices tend to find resistance when they are rising, and the 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 unfavorable movement in the stock prices.

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 any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.

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