The recreational industry is experiencing a surge in demand, driven by Americans’ desire for outdoor recreation, mental well-being, and memorable experiences with family and friends. Despite a temporary slowdown in boat sales after the exceptional growth during the COVID-19 pandemic, the market has demonstrated resilience with a rebound in April’s consumer spending.
As summer approaches, boating participation is expected to remain robust. Therefore, I think investors could consider buying quality recreational stocks BRP Inc. (DOOO), Marine Products Corporation (MPX), and MasterCraft Boat Holdings, Inc. (MCFT) this week.
After a temporary lull in consumer spending over the course of two months, there was an impressive rebound in April, with spending rising by 0.8%. This increase is a promising indication of consumers resilience in the face of escalating prices.
Moreover, reports highlighting the robustness of the labor market, including a resurgence in factory production and an uptick in business activity, contribute to the notion that the economy is undergoing revitalization in the spring season.
Furthermore, the rise in tourism and the disposable income of people in emerging countries are some of the major factors driving the growth of the global recreational boat market. Also, the growing participation in competitive and recreational boating activities worldwide contributes to the market’s expansion.
The global recreational boat market is experiencing significant growth, with a value of $33.60 billion in 2022 and projected to reach $58.80 billion by 2032, representing a CAGR of 5.9% over the next ten years.
Let us discuss the stocks mentioned above, which are poised to capitalize on the recreational industry’s tailwind:
BRP Inc. (DOOO)
Headquartered in Valcourt, Canada, DOOO designs, develops, manufactures, distributes, and markets powersports vehicles and marine products in North America, Europe, Australia, New Zealand, and Latin America.
On April 11, 2023, DOOO inaugurated its first European Design and Innovation Centre, marking a significant milestone in its commitment to design and innovation as key catalysts for growth.
DOOO’s trailing-12-month EBIT and EBITDA margins of 13.52% and 16.13% are 84.4% and 48.2% higher than the respective industry averages of 7.33% and 10.88%. Its trailing-12-month ROCE of 494.73% is significantly higher than the industry average of 10.18%.
During the fiscal first quarter that ended April 30, 2023, DOOO’s revenues rose 34.3% year-over-year to CAD2.43 billion ($1.82 million). Its gross profit grew 37.2% year-over-year to CAD623.50 million ($465.70 million). In addition, its normalized net income and EPS increased 40% and 43.4% year-over-year to CAD192 million ($143.41 million) and CAD2.38, respectively.
Street expects DOOO’s revenue to increase 11.7% year-over-year to $8.17 billion in 2024. The company is expected to report an EPS of $2.21 in the same quarter. Moreover, it has surpassed the consensus revenue and EPS estimates in all four trailing quarters, which is impressive.
DOOO’s shares have gained 14.6% over the past nine months to close the last trading session at $77.16.
DOOO’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
DOOO has a B grade for Value. Within the 37-stock Athletics & Recreation industry, the stock is ranked #2.
Access DOOO’s additional POWR Ratings for Growth, Sentiment, Momentum, Stability, and Quality here.
Marine Products Corporation (MPX)
MPX designs, manufactures, and sells recreational fiberglass powerboats worldwide for sport, fishing, and jet boat markets.
MPX’s trailing-12-month EBIT and EBITDA margins of 13.18% and 13.64% are 79.7% and 25.4% higher than the 7.33% and 10.88% industry average. Its trailing-12-month ROCE of 38.27% is 276.1% higher than the 10.18% industry average.
On April 26, MPX declared a regular quarterly cash dividend of $0.14 per share, payable on June 9, 2023. The company pays an annual dividend of $0.56, that translates to a forward yield of 3.41% on the overall price level. Its dividend payment has grown at a CAGR of 9.7% over the past five years.
MPX’s net sales rose 55.2% year-over-year to $118.91 million in the fiscal first quarter that ended March 31, 2023. Its gross profit increased 57.8% year-over-year to $29.02 million. Moreover, net income and net income per share grew 63.5% and 61.9% year-over-year to $11.55 million and $0.34, respectively.
Shares of MPX have gained 50.3% over the past six months and 39.6% year-to-date, closing its last trading session at $16.43.
MPX’s POWR Ratings reflect its robust fundamentals. The stock has an overall A rating, translating to a Strong Buy in our proprietary rating system.
It also has an A grade for Growth and a B for Sentiment and Quality. It is ranked first within the same industry.
Click here to see MPX’s additional POWR Ratings (Value, Momentum, and Stability).
MasterCraft Boat Holdings, Inc. (MCFT)
MCFT designs, manufactures, and markets recreational powerboats. The company operates through four segments: MasterCraft; Crest; NauticStar; and Aviara.
MCFT’s trailing-12-month EBIT and EBITDA margins of 15.52% and 17.38% are 111.6% and 59.8% higher than the industry averages of 7.33% and 10.88%, respectively. Its trailing-12-month ROCE of 45.68% is 348.9% higher than the 10.18% industry average.
On May 16, MCFT announced a partnership with Suntex Marinas, a premier marina network providing memorable on-water experiences at iconic U.S. destinations.
Matt McDevitt, VP of Global Sales at MCFT, said, “Suntex’s world-class hospitality and iconic U.S. destinations parallel MasterCraft’s premium craftsmanship and luxurious amenities that put the boater’s experience as the first priority.”
MCFT’s net sales rose 11.5% year-over-year to $495.48 million during the nine months that ended April 2, 2023. The company’s gross profit grew 14.2% from the previous-year quarter to $126.80 million. Its adjusted net income increased 21.6% year-over-year to $71.10 million, and adjusted EPS rose 28% year-over-year to $3.98.
Analysts expect MCFT’s EPS to increase 11.4% year-over-year to $5.06 in the current fiscal year 2023. The company has surpassed the consensus EPS and revenue estimates in all of four trailing quarters.
Over the past nine months, the stock has gained 26.9% to close the last trading session at $30.13.
It’s no surprise that MCFT has an overall B rating, equating to a Buy in our POWR Ratings system.
It also has a B grade for Growth, Value, and Quality. It is ranked #2 in the same industry.
In addition to the POWR Ratings stated above, one can access MCFT’s additional ratings for Growth, Sentiment, Stability, and Momentum here.
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DOOO shares were trading at $76.45 per share on Thursday morning, down $0.71 (-0.92%). Year-to-date, DOOO has gained 0.30%, versus a 11.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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