Winnebago Industries, Inc. (WGO) in Forest City, Iowa, designs and distributes recreational vehicles and marine equipment for leisure travel and outdoor recreation activities. It operates through six segments: Grand Design Towables; Winnebago Towables; Winnebago Motorhomes; Newmar Motorhomes; Chris-Craft Marine; and Winnebago Specialty Vehicles.

For its fiscal second quarter, ended Feb. 26, 2022, revenue for its Towable sector increased 47.2% year over year to $646.6 million, owing mostly to strong customer demand for Grand Design and Winnebago branded goods. Due to its positive pricing and operational discipline, WGO’s quarterly adjusted EBITDA increased 61.3% year-on-year to $100.6 million. Its backlog in the category was $1,873 million (47,438 units), representing a 55.2% increase year on year.

However, the company's shares have plunged 83.4% in price over the past year and 27.9% year-to-date. In addition, it is currently hovering near its 52-week low of $53.04.

Click here to check out our Automotive Industry Report for 2022

Here is what could shape WGO's performance in the near term:

Low-Profit Margins

WGO's trailing-12-month gross profit margin of 18.2% is 48.2% lower than the 35.9% industry average. The company's 1.8% trailing-12-month levered free cash flow margin is 63.7% lower than the 4.9% industry average. Its 12.6% trailing-12-month EBITDA margin is slightly lower than the 12.7% industry average. In addition, the company's 1.7% trailing-12-month CAPEX/Sales is 34.9% lower than the 2.6% industry average.

Consensus Rating and Price Target Indicate Potential Upside

Among the six Wall Street analysts that rated WGO, five rated it Buy, and one rated it Hold. The 12-month median price target of $82.50 indicates a 52.8% potential upside. The price targets range from a low of $55 to a high of $102.

POWR Ratings Reflect Uncertainty

WGO has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. WGO has a D grade in Stability. The stock's 1.86 beta is in sync with the Stability grade.

Among the 68 stocks in the F-rated Auto-Vehicle Manufacturers industry, WGO is ranked #19.

Beyond what I have stated above, you can view WGO ratings for Quality, Growth, Value, Momentum, and Sentiment here.

Click here to check out our Automotive Industry Report for 2022

Bottom Line

Despite beating the consensus estimate, shares of WGO have declined 12.6% in price over the past five trading sessions. In addition, the stock is currently trading below its 50-day and 200-day moving averages of $63.70 and $68.98, respectively, indicating bearish sentiment. While WGO intends to become carbon-free by 2050, signaling an increasing trend toward electric RVs, because the semiconductor chip shortage is likely to last throughout 2022, the company's lower-than-industry profit margins may decline further. Therefore, we believe investors should wait for its prospects to stabilize before investing in the stock.

How Does Winnebago Industries Inc. (WGO) Stack Up Against its Peers?

While WGO has an overall C rating, one might want to consider its industry peers, Isuzu Motors Limited (ISUZY), which has an overall A (Strong Buy) rating, and Stellantis N.V. (STLA), and Honda Motor Company (HMC), which have an overall B (Buy) rating.

WGO shares were trading at $53.31 per share on Monday morning, down $0.69 (-1.28%). Year-to-date, WGO has declined -28.68%, versus a -4.37% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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