This Stock Is Driving Over the Competition

After spending about two hours today shoveling snow out of my driveway after our first , plenty of things went through my head -- like how I should have bought a bigger shovel and chosen a place to live that doesn't have a steep driveway.

But I also thought about the implications of snow across the United States and how certain businesses thrive from adverse weather conditions. After a review of potential benefactors, I came across a company that drives all over the competition -- Polaris Industries (NYSE: PII  ) .

All-terrain profits
OK, so despite my snow reference, Polaris is a lot more than just snowmobiles. It also makes a wide variety of all-terrain vehicles and motorcycles and even has a parts division.

The economy has been sputtering over the past few quarters, but Polaris doesn't seem to care. It has surpassed analysts' profit expectations for the past 16 quarters and is clicking on all cylinders, with its motorcycle and ATV businesses showing growth of 116% and 49%, respectively, in the latest quarter.

What's at the heart of this expansion? Innovation!

Polaris has been introducing new products to its all-terrain product line, and they've been well received. New Ranger side-by-side vehicles, as well as new additions to the snowmobile and Victory motorcycle lines, have been boosting gross margins.

Another reason for the significant jump in Polaris' bottom line is its inventory-control process. Inventories are down by double digits at Polaris' retailers, as the company has streamlined its re-ordering system under what it calls the Max Velocity Program. Polaris' profit margin has enjoyed a sizable boost as a result.

Crunching the numbers
With multiple players in similar businesses you may ask, why Polaris? I say it's all in the figures.

Polaris' motorcycle division competes most directly with Harley-Davidson (NYSE: HOG  ) . Although Harley towers over Polaris in terms of motorcycle output, revenue growth at Polaris currently dwarfs that at Harley-Davidson. And that's not to mention Polaris' healthy net cash position compared with HD's nearly $5 billion in net debt.

Looking at all-terrain competitors, Arctic Cat (Nasdaq: ACAT  ) comes to mind. Fellow Fool Alex Pape recently offered his insight on Arctic Cat, but I have to say that with higher expected revenue growth and a considerably lower forward earnings multiple, Polaris again looks like the better option.

Foolish final thoughts
Polaris has made a habit of beating market expectations over the past four years. As a result, the stock has traded 88% higher while the S&P 500 has fallen 15% over that time period. At eight times book value and 16 times forward earnings, Polaris isn't cheap, but if it keeps on beating earnings and continues to generate an impressive return on equity figures, you might be kicking yourself for not jumping on board.

More related Foolishness:

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Fool contributor Sean Williams owns no shares in any companies mentioned in this article, nor did he harm any snowmen while shoveling his driveway. You can follow him on CAPS under the screen name TMFUltraLong. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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