The recreational vehicle industry has taken off lately, and the boom has revealed companies that many investors didn't even know existed. LCI Industries (NYSE:LCII) makes many of the components that go into new recreational vehicles, and the industry's growth trend has gone a long way toward making the company formerly known as Drew Industries more of a household name among those who follow growth stocks.

Coming into Friday's second-quarter financial report, LCI investors expected to see continued rises in earnings and sales from the RV component manufacturer. Yet LCI did far better than those expectations on the sales front, showing just how strong the industry's expansion continues to be. Let's look more closely at LCI Industries and how its latest performance fits in with its future prospects.

Picture of typical RV highlighting the jacks that LCI Industries provides.

Image source: LCI Industries.

LCI Industries gets a burst of speed

LCI Industries' second-quarter results had some good news for those following the stock. Revenue jumped 24% to $547 million, dramatically outpacing the consensus forecast among investors for just $508 million in sales. Net income of $40.1 million was up a more modest 7% from the year-ago period, and the resulting earnings of $1.59 per share matched what most shareholders were expecting to see from the RV component maker.

Looking more closely at LCI's numbers, favorable trends we've seen in past quarters generally continued. Sales to original equipment manufacturers climbed by 24% from the year-ago quarter, with revenue from motorhome-related RV components climbing at a healthier 30% pace. Sales related to travel trailers, fifth wheels, and industries adjacent to actual recreational vehicles were up 22% to 23%, and revenue from the aftermarket channel climbed by nearly a third. Operating profit rose more sharply for the aftermarket segment, posting double-digit increases compared to the 5.5% rise for the OEM segment.

LCI has grown through acquisitions, but their impact has lessened recently. Organic growth amounted to 20% during the second quarter, with only four percentage points of revenue gains coming from merger and acquisition activity.

LCI prides itself on contributing a big portion of the components that go into new RVs, and favorable trends continued during the quarter. The typical travel trailer or fifth-wheel RV now has $3,104 in components from LCI, up $91 from 12 months ago. Growth in motorhome share has been more substantial, with a rise of $152 to $2,072. Organic growth from new products, acquisitions, and changes in the RVs that the industry produces all helped boost those numbers.

CEO Jason Lippert was pleased with how things are going. "The RV industry growth trend in 2017 remains strong," Lippert said, "as second quarter wholesale RV shipments were up 15%." The CEO pointed to a new generation of RV enthusiasts helping to make the industry stronger, and sentiment during the quarter remains bullish as RV manufacturers start to add capacity in order to meet rising demand.

Can LCI Industries keep growing?

In particular, retail demand for RVs is up 11% through May, and LCI thinks that those numbers will get revised upward once more data becomes available. LCI itself saw a 27% rise in net sales during the month of July compared to 2016's corresponding figure, and aftermarket sales for the month were up 35%. Lippert was encouraged by the signs of early success in the third quarter.

Still, LCI is being smart about its attitude toward growing its business. Acquisitions are an easy way to expand, but as the RV industry booms, valuations are certain to rise. LCI has set out a definitive list of criteria to maintain a disciplined approach to strategic purchases, including that an acquired company must immediately boost LCI's overall profit and setting strict standards on valuation compared to key financial metrics. This approach should serve LCI well if it can stick to its guns and insist on making only the best deals going forward.

Despite the signs of continued growth, LCI Industries shareholders seemed to focus on the fact that the company failed to exceed the consensus forecast for earnings. The stock fell more than 5% shortly after the market opened following the announcement. Yet as long as the RV industry keeps doing as well as it is, LCI will have the potential to participate fully in its growth and reward long-term investors accordingly.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.