Patrick Industries, Inc.‘s (PATK – Free Report) have gained 54.8% over the past year, outperforming the construction products sector of Zacks – Mobile Homes and RV Builders and the rally by 30.9% and 43.8% of the S&P 500, respectively.
This leading manufacturer and distributor of construction components and products for recreational vehicles, marine, manufactured homes as well as industrial markets has focused on improving housing market prospects, profitable acquisitions as well as strong efforts. geographic expansion. The outperformance can also be attributed to its impressive history of surprises, having exceeded Zacks consensus estimates for the past six quarters.
Here are some factors driving the growth of this Zacks Rank # 2 (Buy) business, which shares space with Masco Company (MAS – Free report), TopBuild Corp. (BLD – Free report) and Advanced Drainage Systems, Inc. (WMS – Free report) in the same industry. You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.
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Strengthening the housing industry
The US housing industry has shown resilience in recent months. Recent market data – indicating a short-term outlook – is encouraging, given the drop in mortgage rates and the reduction in coronavirus-induced restrictions. Housing demand also remained strong, supported by the Fed’s accommodative stance, low borrowing costs and the lack of available supply, despite rising lumber prices. In the first four months of 2021, construction activity increased by 5.8% compared to the same period in 2020.
In addition to housing resilience, 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. Notably, industry experts predict that 2021 will be the best year for RV shipments.
Expansion through acquisitions
Since 2010, Patrick has acquired more than 75 companies in key markets. Specifically in the first quarter of 2021, it added Sea-Dog Corporation and Sea-Lect Plastics. Sea-Dog is a distributor of a variety of marine and powersports equipment and accessories to distributors, wholesalers, retailers and manufacturers. In addition, it provides plastic injection molding, design, product development and expert tools to enterprises as well as government entities. The acquisition is a perfect fit for its existing products and will continue to provide long-term strategic value, bringing innovative, high-quality product lines to its portfolio. In particular, the buyout was added to the Distribution & Manufacturing segment.
After the end of the first quarter, the company acquired Hyperform Inc., which operates under the SeaDek brand in the marine equipment market and the aftermarket.
Solid returns, cheaper than the industry
Patrick is a great choice for investors because he is cheaper than the industry. The 12-month price / earnings multiple for the company is 15.77, cheaper than the industry’s 18.25.
In addition, Patrick’s return on equity (ROE) is indicative of growth potential. Its ROE of 21.7% compares favorably with the industry average of 16.5%, which implies that it uses shareholders’ funds efficiently.
Estimates look solid
Profit estimates for the second quarter and 2021 rose 27.1% and 22.5%, respectively, over the past two months, reflecting growing analyst optimism about the company’s earnings outlook. Further, this indicates year-over-year growth of 5,833.3% and 78.6%, respectively.
A strong VGM score of A is another reason for investors to believe in its fundamentals, backed by a value score of A and a growth score of B.
+1,500% growth: one of the most interesting investment opportunities of 2021
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