Better Buy: MarineMax vs. Brunswick

As the recreational boating industry returns to a seasonal norm in the post-pandemic era, one thing remains clear -- the boating lifestyle remains in high demand. IMARC Group forecasts that the global recreational boating market will grow at an annualized rate of 6% through 2028. While the industry's long-term outlook is promising, near-term economic uncertainty could impact progress this year.

Let's analyze two players in the marine industry to determine which consumer discretionary stock makes a better buy in today's market. 

The case for MarineMax

MarineMax (HZO -0.90%) describes itself as "the world's largest lifestyle retailer of recreational boats and yachts, as well as yacht concierge and superyacht services." Headquartered in Clearwater, Florida, it's a recreational boat and yacht retailer, marina operator, software developer, and boat manufacturer.

It acquired IGY Marinas last October, and has been pleasantly surprised by its new asset's performance. IGY owns and operates 23 "irreplaceable" luxury superyacht marinas across the globe, in sumptuous destinations from Italy to Costa Rica. According to CFO Michael McLamb, IGY has been "exceeding expectations" for MarineMax since its purchase.

Last quarter, MarineMax posted a gross margin of 35.2% -- a new record for its fiscal Q2 -- driven primarily by IGY's robust performance. Had it not been for IGY's contributions, MarineMax's gross margin would have actually dipped slightly year over year for the period, which ended March 31. Acknowledging this, McLamb pointed out that product margins have stayed "relatively healthy" despite modestly slipping.

MarineMax's other higher-margin businesses, such as its superyacht brokerage, charter, and concierge services, also performed well and helped pad its gross margin. Consolidated revenue fell 6.5% year over year as boat dealers' inventories returned to normal, interest rates climbed, and consumers behaved with more discretion as compared to 2022.

But let's not forget that MarineMax's $570 million in revenue last quarter made it the company's second-best second quarter ever in terms of sales. Confident in the long-term viability of the business, McGill affirmed that "the demand for the boating lifestyle remains very strong."

The case for Brunswick

One of the New York Stock Exchange's oldest companies, Brunswick (BC 1.35%) was first listed in 1925. A manufacturer from the outset, Brunswick has changed product lines over time, from billiard tables to bowling alleys -- and now boats. Today Brunswick serves as the "world's leader in recreational boats, marine engines, and marine parts and accessories."

In the first quarter, Brunswick posted record sales of more than $1.7 billion, along with better earnings per share than any Q1 in its history.

"Steady demand, new product performance, and pricing implemented in previous quarters" fueled the 3% year-over-year revenue gain, according to Brunswick CFO Ryan Gwillim.

Since it spent less working capital in the first quarter, Brunswick's free cash flow increased by $135 million compared to the same period last year. Between Brunswick's four main operations, its boats and propulsion segments drove the most impressive results, with sales growth of 17% and 7%, respectively. Q1 marked the fourth straight quarter of double-digit operating margins as well. 

Although Brunswick's engine parts and accessories segment shrank by 13% year over year, its top line actually surpassed the Q1 2019 result by 35%. Supply chain issues persist, but the company produced more boats and engines last quarter than in Q1 2022. During the late-April earnings call, Brunswick CEO David Foulkes commented, "Our supply chain environment has broadly significantly improved."

With prime boat selling season now upon us, Foulkes asserted that dealer inventory levels were "healthy and very current." He also mentioned being "cautiously optimistic" about the summer selling season, and said that "orders remain on track with no signs of material wholesale cancellations." 

Which recreational boating stock is a better buy?

To determine which of these stocks is a better buy in today's market, let's compare their price-to-earnings ratios (P/E), price-to-sales ratios (P/S), and price-to-book ratios (P/B).

Data Source: Ycharts.

With much lower P/E, P/S, and P/B ratios, MarineMax stock makes a better buy. The company's diversified business model, including its recession-proof megayacht marina and charter operations, could also provide MarineMax with better resilience in an uncertain economy.