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Camping World (CWH): Buy, Sell, or Hold Post Q3 Earnings?

By: StockStory

January 27, 2025 at 04:10 AM EST

CWH Cover Image

Since July 2024, Camping World has been in a holding pattern, posting a small return of 0.7% while floating around $22.94. The stock also fell short of the S&P 500’s 9.4% gain during that period.

Is now the time to buy Camping World, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.

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

Why Is Camping World Not Exciting?

Founded in 1966 as a single recreational vehicle (RV) dealership, Camping World (NYSE: CWH) still sells RVs along with boats and general merchandise for outdoor activities.

1. Shrinking Same-Store Sales Indicate Waning Demand

Same-store sales is a key performance indicator used to measure organic growth at brick-and-mortar shops for at least a year.

Camping World’s demand has been shrinking over the last two years as its same-store sales have averaged 14.2% annual declines.

Note that Camping World reports its same-store sales intermittently, so some data points are missing in the chart below.

2. Weak Operating Margin Could Cause Trouble

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Camping World was profitable over the last two years but held back by its large cost base. Its average operating margin of 3.6% was weak for a consumer retail business. This result isn’t too surprising given its low gross margin as a starting point.

3. High Debt Levels Increase Risk

Debt is a tool that can boost company returns but presents risks if used irresponsibly. As long-term investors, we aim to avoid companies taking excessive advantage of this instrument because it could lead to insolvency.

Camping World’s $2.53 billion of debt exceeds the $28.38 million of cash on its balance sheet. Furthermore, its 9× net-debt-to-EBITDA ratio (based on its EBITDA of $272.2 million over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Camping World could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope Camping World can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

Final Judgment

Camping World isn’t a terrible business, but it doesn’t pass our quality test. With its shares underperforming the market lately, the stock trades at 22.3× forward price-to-earnings (or $22.94 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better stocks to buy right now. We’d recommend looking at a safe-and-steady industrials business benefiting from an upgrade cycle.

Stocks We Would Buy Instead of Camping World

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