As More Americans Seek Outdoor Fun, Don't Ignore This Recreational Vehicle Specialist

While its all-terrain vehicles (ATVs) are well known among those raising dust on North America's summer roads and trails and those riding its snowmobiles along various winter paths, Bombadier Recreational Products (DOOO -2.23%) (BRP) is less well known among investors. Large recreational vehicle (RV) sellers like Camping World Holdings (CWH 2.79%) have been getting the investors' attention of late, cashing in on the growing momentum of Americans seeking fun and recreation in the great outdoors after last year's COVID-19 lockdowns.

That's too bad because BRP has been a high-performance stock over the past 18 months. After hitting a pandemic-influenced low of $12.97 a share in mid-March 2020, the stock price revved up 643% to $96.44 by late April 2021 before easing off the throttle to its current share price around $78. 

What is it about BRP that has investors so excited? And why don't more investors know about this top performer? Here's why you should give BRP stock some serious attention.

Image source: BRP.

BRP is in a thriving sector

BRP straddles the powersports, recreational vehicle, and boating sectors thanks to its diverse product line, and all those vehicle categories are seeing continuing demand and sales growth during 2021. The COVID-19 lockdowns triggered an RV boom last spring and summer as Americans turned to the outdoors and camping as an escape from pandemic-related restrictions on their usual entertainment venues.

In RVs, the Recreational Vehicle Industry Association (RVIA) is predicting sales of more than 575,000 RVs in 2021, surpassing, by approximately 14%, the previous all-time record set in 2017. Demand continues strengthening, according to RVIA's monthly report for May 2021, which saw shipments that month surge 75.9% year over year to 49,241 units. The prolonged winning streak of Camping World Holdings helps verify the association's figures.

Other data shows growth in categories closer to BRP's specific product lineup. In the powersports sector, where BRP sells ATVs along with its Ryker and Spyder three-wheelers, the Retail Sales Report of the Motorcycle Industry Council (MIC) shows new motorcycle sales in the first quarter (Q1) of 2021 surging 37.2% versus Q1 2020. The international market is also booming, with the British-based Motorcycle Industry Association (MCIA) providing one example as it reports a 148% year-over-year increase in May registrations -- sales gains it expects to continue through summer.

Related to BRP's Alumacraft and Telwater aluminum boat brands, and its Sea-Doo personal watercraft, Business Insider reports demand for boats in 2021 drove prices up approximately 10% by mid-June. The National Marine Manufacturers Association's (NMMA) 2020 U.S. Boating Statistical Abstract shows new fishing boat sales rising 10.3% last year, cruiser sales jumping 19.5%, and personal watercraft purchases climbing 8.3% over 2019's metrics, with the trend currently continuing.

BRP is beating the S&P 500 and its own past performance

BRP is clearly positioned at the nexus of several powersports and outdoor vehicle markets that are enjoying robust, ongoing growth. But how well is it executing on profiting from this opportunity? A glance at a stock chart shows the company has been outperforming the S&P 500 since late 2016, except for a brief trough in March and April 2020, during COVID-19's first impact on the U.S. economy.

Fiscal Q1 2022 revenue surged 47% year over year to 1.8 billion Canadian dollars. Not only did sales rise almost 50% over fiscal Q1 2021 (calendar year 2020), they jumped 36% above fiscal Q1 2020 (calendar year 2019) before the pandemic began, according to the company's recent earnings conference call. This demonstrates BRP's vigor isn't just an artifact of a rebound from the 2020 pandemic lockdowns (which affected it only briefly in any case).

Image source: Getty Images.

Bottom-line success also skyrocketed, with quarterly CA$2.79 adjusted EPS up 1,016% from fiscal year 2020 (calendar 2019) with its CA$0.25 adjusted EPS. Gross profit margin improved over both 2020 and 2019 for the three months ending April 30 (the company's fiscal Q1):

Source: BRP earnings reports.

Sales, efficiency, and earnings all appear to be on a strong -- and accelerating -- upward trajectory. Furthermore, the positive trend caused BRP to boost its fiscal 2022 full-year guidance. It raised its revenue expectations for its seasonal and powersports sectors while leaving year-round and marine sector sales forecasts in the double-digit percentage growth area, but unchanged. Other key growth metrics also have increased guidance:

Source: BRP earnings reports.

The company also appears to be taking action to improve the quality of outstanding shares for its investors through a "modified Dutch auction" buying back shares, announced on June 15. According to the company press release, up to CA$350 million in shares will be bought back, or close to $284 million in U.S. dollars.

What's the takeaway on BRP?

While BRP has multiple bullish factors pushing it toward growth and increasing stock value in both the short term and long term, it is potentially being hampered somewhat by the supply chain problems affecting multiple companies and industries in COVID-19's wake. CEO Jose Boisjoli noted during the earnings conference call that "we expect retail growth to be limited in the second and third quarters, mainly due to the ongoing supply chain constraints which are evolving very rapidly," but he went on to remark, "Plants are running at full capacity and we are in the process of increasing production capacity at Juarez and Queretaro [cities in Mexico]."

Though supply chain problems could cause temporary delivery limitations, any negative pressure on stock price is a buying opportunity. BRP is an efficient company with good cash flow, popular products well situated to profit from the surge in outdoor activities, powersports, and boating, and the fast, strong growth, outperforming the S&P 500, to show it's on the track to continued success in coming years. Those interested in investing in industrials stocks may want to consider BRP, as a bullish pick for any portfolio despite its relatively low profile in the news.