Zacks’ construction products industry – Mobile homes and RV builders has been at the center of concern after the COVID-19 pandemic hit the country. The COVID-19 pandemic has sparked greater interest among consumers of recreational vehicles (“RVs”). Travel restrictions imposed by the pandemic have prompted many first-time buyers to switch to recreational vehicles.
RV Industry Association President and CEO Craig Kirby said, “RV shipments in 2021 are expected to reach record levels as the industry continues to grow for more than 40 years at long term. We expect consumers to continue to turn to recreational vehicles not only because they allow people to responsibly recreate, but also because recreational vehicles offer people the freedom to live a fun lifestyle. and active outdoors.
Notably, industry experts predict that 2021 will be the best year for RV shipments.
Among industry indicators that include Thor Industries, Inc. (THO – Free report) and Skyline Champion Corporation (SKY – Free report), let’s check if Patrick Industries, Inc. (PATK – Free report) or Winnebago Industries, Inc. (WGO – Free Report) is a more profitable choice for investors right now. Notably, the two companies are almost neck and neck in terms of market cap and carry a Zacks No.2 (buy) rank. You can see The full list of current Zacks # 1 Rank (Strong Buy) stocks here.
Let’s take a closer look at the measures of business growth and profitability.
What defines the stock?
Winnebago – with a market capitalization of $ 2.49 billion – is a leading North American manufacturer with a diverse portfolio of recreational vehicles and marine products used primarily in leisure travel as well as in leisure activities. outdoors. Winnebago distributes recreational and marine vehicle products through independent dealers in the United States and Canada. At the same time, it expects strong retail momentum in the spring season, supported by a portfolio of leading brands and high quality products for its valuable dealer network.
Conversely, Patrick – with a market capitalization of $ 2.04 billion – manufactures and distributes components as well as building products and materials to original equipment manufacturers, primarily in the recreational vehicle markets, of the navy, prefabricated houses and industry. Patrick operates in two reportable segments, manufacturing (70% in 2020) and distribution (30%), via a national network, thus reducing transit delivery times and costs for the regional manufacturing footprint. The company sees strong demand for outdoor recreation, and huge appeal and potential for recreational vehicles and marine markets.
Shares of Winnebago and Patrick have gained 28.1% and 63.3% respectively over the past year, compared to 45.3% in the sector. Therefore, compared to the collective performance of the industry, Patrick is doing better than Winnebago.
Image source: Zacks Investment Research
Outlook and history of surprises
Analysts expect Winnebago’s earnings to grow 182.6% for fiscal 2021. Patrick’s net income for 2021 is likely to rise 78.6% year-over-year. Therefore, Winnebago has an advantage over Patrick in terms of profitability.
Meanwhile, given a more comprehensive earnings history, Winnebago has beaten earnings estimates in 15 of the past 17 quarters, while Patrick has outperformed the same in 16 of the past 17 quarters. Therefore, Patrick is a clear winner in terms of the surprise story.
The return on equity over the past 12 months for Winnebago is 19.8%, while Patrick’s is 21.7%. Remarkably, both companies offer higher returns to investors compared to the industry’s 17.1%.
A look at the valuation of equities
The 12-month price / earnings multiple for Winnebago and Patrick are 14.79 and 16.84, respectively, compared to 19.37 for the industry. Patrick’s shares are more expensive than Winnebago but less expensive than the industry average.
The 12-month price / sales ratio for Winnebago and Patrick is 0.9 and 0.73, respectively, compared to 0.96 for the industry. After looking at these valuation metrics, we can say that both companies are cheaper than the industry.
Using the factors mentioned above, we can come to the conclusion that while both companies offer better returns to investors and are cheaper than the industry, Patrick has an advantage over Winnebago in terms of stock market performance. , surprise history and return on equity. .
Going forward, both companies remain optimistic about the overall growth trend of the mobile home industry and RV manufacturers, given the strong demand for RV and marine products as well as an environment favorable housing.
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