Shares of Winnebago Industries (NYSE:WGO) dipped a bit after the release of fourth-quarter earnings last Thursday, but they've since mostly recovered. What gives? I thought decreasing fuel costs were a good thing for gas-guzzling motor-home and RV makers.

Well, the shares are up almost 23% from August lows, when overall market malaise and rising commodity prices were thought to increase indefinitely. What a difference a couple of months makes. Oil prices have fallen, and investors no longer seem to think a recession is imminent. Mr. Market sure is moody.

Fellow fool Rich Smith can walk you through pre-earnings expectations on Winnebago in his Foolish Forecast, but in a nutshell, the company missed earnings by about $0.10 per share for both the fourth quarter and full year. You can pretty much write off fiscal 2006 as a year when rising fuel costs and interest rates scared off consumers from buying higher-priced motor homes and shifted purchasing to the company's lower-priced and more fuel-efficient Class C diesel motor homes.

Conditions are expected to improve as gas prices and interest rates have moderated, a topic alluded to by management in the earnings press release, although it still expects an anemic first couple of quarters for fiscal 2007.

Nevertheless, 2006 results demonstrate just how well run Winnebago is. First of all, it remained profitable for the year and has no long-term debt, and operating cash flow was 2.5 times reported net income because of strong inventory and receivables management. Factor in a small amount of capex, and we see free cash flow came in at approximately $3.45 per share. That's a price-to-free-cash flow multiple of under 10.

Additionally, management continues to benefit shareholders by repurchasing shares and paying a dividend with a current yield of 1.2%. I don't know about you, but those valuation numbers are pretty compelling, with a small yield to collect until industry conditions recover.

In any case, demographic trends are expected to be in the industry's favor as baby boomers retire and look to travel the open roads with their newly found free time. That could benefit peers such as Monaco Coach (NYSE:MNC), Thor Industries (NYSE:THO), Coachmen Industries (NYSE:COA), and Fleetwood (NYSE:FLE). There's no hurry as industry conditions will recover slowly, but at some point going forward, a rising tide of increased sales should benefit all ships sailing, er, driving in the space. You know what I mean.

Drive off with further Foolishness:

Interested in other stocks that take advantage of the baby boom? Check out our report, Big Boom.

Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. The Fool has an ironclad disclosure policy. Feel free to email him with feedback or to discuss any companies mentioned further.