Undervalued Stock Thor Industries Bolts Higher On Strong Results
Thor Industries (NYSE: THO) reported a blowout FQ2 and we are not surprised. Not only are there strong tailwinds blowing throughout the industry but the company has been working on capacity, building inventory, and acquiring growth as well. This all adds up to outperformance for both the quarter and the year and the sell-side community is noticing. What’s better, though, is that insiders in the company are buying the stock as well and that can only mean one thing; shares of Thor Industries, trading at a mere 5.7X its earnings consensus, are deeply undervalued and about to make a move higher.
Insider buying isn't all that strong at 0.04% of the market cap but it is a driving force for price action as is the institutional activity. The institutions have been scooping the stock up for the last year or more and purchased a net 2.1% of the market cap in the first 9 weeks of 2022 alone. This brings their holding up to 89% of the company and makes Thor Industries one closely held stock. This too is important because the short-interest is running near 11% and will also be a driving force for share prices moving forward.
Thor Industries Torches The Consensus Estimates In Q2
Thor Industries had a phenomenal quarter in which continued demand and growing backlogs drove business to new records and put the analyst's targets to shame. The company reported $3.88 billion in net revenue for a gain of 42.1% over last year and beat the consensus by almost 1000 basis points. This is on top of last year’s 36% increase and is aided by acquisitions. On a segment basis, wholesales rose by 14.5% while North American towables improved by 44.6% and North American RV by 69.3%. The European RV segment performed the worst with a small decline YOY but that is due to chassis shortages and not demand.
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Moving down to the margin, the company reported a 220 basis point improvement in the gross margin due to revenue leverage, pricing actions, and internal efficiency that we see lingering into the coming quarters. The gross margin of 17.4% led to solid bottom results as well with the $4.79 in GAAP EPS up more than 100% YOY and $1.46 better than expected.
Thor Industries execs did not give specific guidance for the year but reiterated their agreement with the RVIA’s assessment. This should lead Thor Industries, and the entire RV industry, to another several quarters of strong performance, and that outlook is supported by the backlogs. While the backlog has begun to come down on a sequential basis it is up 60% versus last year and is enough to sustain the business for nearly 5 quarters at the current rate of production.
The Analysts Aren’t Giving Thor Industries Enough Credit
There have been no analyst’s notes out since the Q2 earnings were released but we think that will change. As tepid as the rating is, a firm Hold, the consensus target implies about 50% of upside which suggests the sell-side community should be buying and the institutional activity says they are.
Turning to the charts, shares of Thor Industries began bottoming in January 2022 and are trying hard to confirm that bottom now. Price action is up in the wake of the earnings release but facing stiff resistance at the short-term moving average, possibly from short-sellers. If the price action can get above the short-term EMA we see the situation changing and price action begins to move higher. Longer-term, this stock should be trading well above its current valuation and could easily reach the consensus target of $130.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| THOR Industries (THO) | $111.55 | +3.0% | 1.79% | 22.63 | Moderate Buy | $110.80 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
