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Three Reasons to Avoid BC and One Stock to Buy Instead

By: StockStory

December 16, 2024 at 03:35 AM EST

BC Cover Image

Brunswick has been treading water for the past six months, recording a small loss of 1.6% while holding steady at $73.59. The stock also fell short of the S&P 500’s 10.4% gain during that period.

Is now the time to buy Brunswick, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.

We don't have much confidence in Brunswick. Here are three reasons why there are better opportunities than BC and a stock we'd rather own.

Why Do We Think Brunswick Will Underperform?

Formerly known as Brunswick-Balke-Collender Company, Brunswick (NYSE: BC) is a designer and manufacturer of recreational marine products, including boats, engines, and marine parts.

1. Long-Term Revenue Growth Disappoints

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Brunswick’s sales grew at a sluggish 5.6% compounded annual growth rate over the last five years. This fell short of our benchmark for the consumer discretionary sector. Brunswick Quarterly Revenue

2. New Investments Fail to Bear Fruit as ROIC Declines

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We typically prefer to invest in companies with high returns because it means they have viable business models, but the trend in a company’s ROIC is often what surprises the market and moves the stock price. Unfortunately, Brunswick’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Brunswick Trailing 12-Month Return On Invested Capital

3. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Brunswick’s revenue to rise by 1.1%. While this projection indicates its newer products and services will fuel better top-line performance, it is still below average for the sector.

Final Judgment

We cheer for all companies serving everyday consumers, but in the case of Brunswick, we’ll be cheering from the sidelines. With its shares trailing the market in recent months, the stock trades at 12.1× forward price-to-earnings (or $73.59 per share). This valuation multiple is fair, but we don’t have much confidence in the company. There are superior stocks to buy right now. We’d suggest looking at Wabtec, a leading provider of locomotive services benefiting from an upgrade cycle.

Stocks We Would Buy Instead of Brunswick

The Trump trade may have passed, but rates are still dropping and inflation is still cooling. Opportunities are ripe for those ready to act - and we’re here to help you pick them.

Get started by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,691% between September 2019 and September 2024) as well as under-the-radar businesses like Comfort Systems (+783% five-year return). Find your next big winner with StockStory today for free.

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