The Key to Winnebago Industries, Inc.'s Future

Winnebagos have found many more fans in recent years, sending shares of Winnebago Industries (NYSE: WGO  ) on a near-vertical trajectory.

In its most recent earnings report, the company posted a strong quarter overall, but failed to impress the Street with its top-line sales. Despite the subsequent stock sell-off, investors should keep in mind that Winnebago Industries (NYSE: WGO  ) has delivered seven consecutive quarters of double-digit sales and profit growth -- an impressive accolade for a company slinging big-ticket items in a recovering economy.

Earnings recap
Shortly after hitting its six-year high in share price, Winnebago fell more than 11% early this week after posting fiscal 2014 first-quarter sales of $222.7 million -- a 15% gain over 2013's number, but short of the Street's ambitious $233.1 million. Deliveries of the iconic motor homes jumped an enormous 31%, but the company's towables segment fell sharply and kept overall numbers from hitting expectations.

It may come as a surprise to investors that Winnebago is a very closely watched stock on Wall Street, considering its relatively small market cap and lack of sexiness. But the Street uses Winnebago's earnings as a bellwether for big-ticket-spending trends and, thus, reacts sharply to the company's results.

On the bottom line, the company actually came in ahead of analyst expectations with $0.40 per share. The number was a giant leap over last year's $0.26 per share and $0.03 ahead of the consensus estimate.

The road ahead...
Let's compare the company to a couple of peers, Thor Industries (NYSE: THO  ) and Polaris. Winnebago trades at just under 15 times forward earnings and an EV/EBITDA of 12.94 times. Thor, by comparison, is a good bit cheaper on an EV/EBITDA basis at 9.94 times. The company recently missed estimates on both the top and bottom lines, but maintains a good order backlog.

Polaris' valuation leads the pack at 21.5 times forward earnings, with a very rich EV-EBITDA of 15.37 times. The company is set to benefit big time on the year's currently snowy winter.

All three companies have great industry tailwinds. Consumers are able to purchase big-ticket items with cheap loans and are eager to get back to their recreational activities after the prior years' tepidity.

For Winnebago investors, the long run of sales growth should continue for some time, but the key to the stock's success in the near-term is subject to Mr. Market's mania. As a medium- to long-term investment, things should remain good for existing investors. For those looking to bank on the reemergence of RV sales -- the inflection point happened a while ago, but there could still be some gains to be had.

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