Thor Industries, Inc.

THO Details

 Thor Industries, Inc.  (NYSE: THO) produces and distributes a variety of recreational vehicles and associated components and accessories, mainly in the United States and Canada. The company's three notifiable sectors are North American Towable Recreational Vehicles, North American Motorized Recreational Vehicles, and European Recreational Vehicles.

Q2 FY22 Results:

• Solid Top Line Performance: In Q2 FY22, the sales were USD 3.88 billion, up 42.1% from USD 2.73 billion in Q2 FY21. Gross margins improved from 15.2% in Q2 FY21 to 17.4% in Q2 FY22.
• Solid Bottom Line Performance: Due to increased revenue and continued expansion in EBITDA margins, THO's net income doubled in Q2 FY22 to USD 266.57 million from USD 132.52 million in Q2 FY21. Furthermore, as of January 31, 2022, the combined RV backlog was USD 17.73 billion, an increase of more than 60% above the RV backlog as of January 31, 2021.
• Industry Above ROE: The company's ROE was 8.4% better than the 0.7% industry average.

Key Risks:

• Customer Concentration Risk: As of January 31, 2022, and January 31, 2021, one dealer, Freedom Roads, LLC, accounted for 14% and 13%, respectively. The North American Towables and North American Motorized divisions record sales to this dealer. This dealer's departure could significantly impact the company's operations.
• Rise of Slippage in Quality and Margins: Thor Industries Inc. competes in a business where practically every RV it and its competitors produce sells quickly. In this situation, it's simple to fall into the trap of overproduction.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

Source: Analysis by Kalkine Group

Technical Summary Analysis:

1-year technical chart as of May 24, 2022, at 07:17 AM PDT Source: REFINITIV. Analysis by Kalkine group

Stock Recommendation:

THOR’s share price has decreased by 37.45% in the past six months and is currently leaning towards the 52-week low of USD 128.87 to USD 66.26. The stock is currently trading below its 50 and above 200 DMA levels, and its RSI Index is at 35.68. We have valued the stock using the EV / Sales multiple based relative valuation methodology and arrived at a target price of USD 81.81.

Over the last six quarters, THOR has generated great financial results while also seeing some market share shifts. THOR has increased its market share in every segment in which it operates in FY22. THOR items have performed well at the retail level and will continue to do so.

Based on the recent stock price drop, the company's expanding business strategy, good sales track record, higher EBITDA margins, and current value, we recommend a “Hold" rating on the stock at the current price of USD 68.31 as of May 24, 2022, at 07:17 AM PDT.

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.