Shares of Camping World Holdings (CWH -0.96%), the recreational vehicle (RV) retailer, have had a rough start to 2022, falling 37% year to date. Investors are worried that higher gas prices will dampen demand for RVs. There is also concern that consumers are less likely to make a major purchase like an RV because they are worried about rising inflation.
That said, these fears seem to already be priced into the stock. Shares look very inexpensive, valued at just five times what the company is projected to earn next year. Furthermore, sales seem to be holding up so far despite the macroeconomic concerns, as the company posted record sales in the first quarter of 2022 with revenue of $1.7 billion. Best of all, Camping World has been keeping its foot on the accelerator with its dividend payout, and now has a forward yield of 8.5%.
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Returns to shareholders
Camping World is displaying a strong commitment to rewarding its shareholders and increasing its dividend payout. It had only recently raised its quarterly dividend from $0.25 to $0.50 in the second half of 2021, and in March, it boosted the quarterly payout to $0.625, which equates to $2.50 annually.
CEO Marcus Lemonis sounds staunchly committed to the substantial dividend payout. When an analyst on the May 4 earnings call asked if there was a scenario in which the dividend would need to be cut, Lemonis said, "We have no plans to modify our dividend strategy at all, and we have sensitized multiple scenarios to ensure that our strategy is sustainable."
In addition to returning capital to its shareholders via this generous dividend payout, Camping World also bought back over 2.5 million shares during the first quarter of 2022, for approximately $79.8 million. Share repurchases are good news for investors because they reduce the number of shares on the market and increase earnings per share. They can also be seen as a sign that management believes the stock is undervalued.
More than just big-ticket items
The company also generates revenue in many ways beyond just the big-ticket purchase of new RVs. Camping World's Good Sam Club offers insurance and roadside assistance. The stores also sell parts and offer maintenance and repair services. It estimates that after several years of growth, the total number of existing RVers has grown by one million. This means that there is a larger pool of potential consumers who will need these services.
These services also help make the company more defensive by giving it steadier income during less-robust parts of the cycle. On the earnings call, Lemonis attested to the value of bringing customers into Camping World's system: "So we're still trying to sell a $13,000 unit arriving at, call it, $129, $139 monthly payment as we look to bring in new people into our ecosystem. We're not going to ever resist trying to capture that."
Camping World also has some interesting growth drivers. The company's recently launched peer-to-peer RV rental platform is gaining traction, with Lemonis saying that rental dollars processed on the platform and the number of units available have both grown significantly from the end of 2021 to the end of the first quarter of 2022.
Secondly, Lemonis says the company will launch its "end-to-end RV purchase experience" in several states this year, which will allow consumers to shop for RVs online and have them delivered to their homes. This all-digital experience would include financing and home delivery, and Lemonis says that it will allow Camping World to "serve customers well beyond the markets that we currently operate in."
Is Camping World a buy?
Camping World is trading at an attractive valuation and has been consistently increasing its dividend. Its visible and outspoken CEO is highly committed to this dividend payout and seems confident it is sustainable.
The market is understandably concerned about inflation and rising gasoline prices but seems to be ignoring that Camping World's business is more than just lumpy, big-ticket sales of new RVs and also includes ancillary services like insurance, service and repairs, as well as additional catalysts like peer-to-peer rentals and the new end-to-end digital experience.
For these reasons, I view shares of Camping World as a buy for the long term.
