April 6, 2018

Valens Research Weekly Equity Idea Highlight for April 4, 2018 – Winnebago Industries, Inc.


This week the Valens Securities team highlights our most interesting equity insight from across our tools and our analysis.

Markets are expecting modest growth and limited ROA’ improvements when age-wave macro factors, strong management alignment and growing confidence about fundamental momentum point to upside

Even after the company’s recent strong stock performance, current market expectations for WGO are overly pessimistic. Markets expect UAFRS-based (Uniform) ROA (ROA’) to only reach prior cycle trough-levels going forward, even as analysts are forecasting sustained ROA’ improvement, in line with the company’s historical profitability levels. Also, the company has a positive age-wave related macro-trend likely driving fundamentals and sustained growth, thanks to more baby-boomers becoming retirees, a group that tends to be stronger buyers of RVs, spelling stronger fundamental upside. Finally, while markets are not expecting operational improvements, the company has been able to use their patience in terms of their capital structure to make a smart acquisition and take on new leverage to help give further operational and growth improvement opportunities to the business. All these factors point to fundamental improvements for the business the market is not pricing in.

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