Some investors are hesitant to jump into Camping World (CWH 1.39%) now after its run up over the past 18 months because they see the company as a beneficiary of the 'work from home'/social distancing trends that developed as a result of the COVID pandemic. The ability of many individuals to work remotely, combined with inherent air travel hesitancy, made RVs a great way to get out and explore. Skeptics reason that as these trends recede and life returns back to normal, growth in RV sales will slow, or worse, a flood of lightly used RVs will hit the market. While these risks are valid, it is worth noting that there is much more to Camping World's revenue generation than just the big ticket items of new RV sales.
More than just RVs
Camping World also makes money by servicing RVs, financing and insuring the RVs it sells, and selling various accessories. Its Good Sam membership program, which includes roadside assistance, savings on gas, and savings at a variety of businesses such as Camping World and Pilot Flying J, gives the company a recurring revenue stream and builds brand loyalty.
Image Source: Getty Images.
Furthermore, it remains to be seen whether these trends were just one-time developments or if RVing will continue to grow in popularity after the COVID era. Some signs already point to this as it seems that the hobby is gaining popularity with younger consumers. As Lemonis stated on the Q2 earnings call, "We continue to be astounded by the insatiable desire that Americans have for experiential travel, exploration of this country, and most importantly, a community of connection with others," which he credits for the company's all-time best quarter. In any case, even if there are challenges ahead, Marcus Lemonis is the type of industrious, actively engaged CEO who seems well-equipped to handle them.
New irons in the fire
Camping World also has other irons in the fire that could eventually contribute to the share price in a meaningful way and bring the company into new verticals. Lemonis sees Camping World not just as a leader in the RV space but as a disruptor within it. Camping World recently debuted its own peer-to-peer RV rental platform, which has the two-fold benefit of increasing revenue while creating potential new customers as consumers who enjoy their experience may decide to buy their own RVs.
Additionally, Camping World will soon launch Electric World, which will expand its reach beyond RVs into verticals like electric ATVs and electric trucks. The company's upcoming September 15th investor conference in Salt Lake City, Utah, will give attendees a sneak peek at the Electric World concept, and if this event is successful it could generate some new buzz for the stock and attract a new cohort of investors. We have seen the excitement the market has for EV-related stocks before, so if this initiative catches on it could significantly increase revenue and draw new interest to the stock.
Dividend payouts
It is an old investing adage that the safest dividend is the one that was just raised. What about one that was just doubled? Despite the fact that Camping World only recently raised its dividend payout to $1.00 per year, on its last earnings call Camping World announced a payout of $2.00 a share per year, giving it a dividend yield of about 5% at its current pricing.
In a low-yield environment where many companies offering yields of over 4% are either low-growth names like utilities and tobacco stocks or high-risk names with the potential for dividend cuts, Camping World stands out because it combines this attractive yield with long-term growth prospects and optionality for its business.
CEO keeps buying
Much like the many NASCAR drivers that Camping World sponsors, CEO Marcus Lemonis keeps his foot on the gas by continuing to reinvest in shares of his own business. What is interesting is that although he owns hundreds of thousands of shares already, he keeps buying as the price increases, indicating his confidence in the company's long-term trajectory.
Note that this isn't being done with warrants or stock options as we see with some CEOs. Instead Lemonis is purchasing these shares at cost on the open market, further indicating his confidence in Camping World.
Valuation
At $40 per share at time of writing, Camping World trades for about 4x forward earnings, which is not a very demanding multiple. While there aren't many other publicly traded RV dealers to compare Camping World to, its peer Lazydays Holdings (LAZY) trades for about 8x forward earnings. Furthermore, management authorized a share buyback program to purchase up to $100 million worth of shares of the stock, and the company repurchased $45.5 million in Q2 2021, indicating that they recognize that shares are undervalued.
With an inexpensive valuation, a 5% dividend yield, a well-known and dynamic CEO who is buying the stock on the way up, and some interesting irons in the fire for the future, Camping World is a strong buying opportunity at its current price.
