John Reese monitors the investment strategies of the stock market's most legendary investors. Here, the editor of Validea looks at a stock that earns a 100% rating on the Peter Lynch "price to earnings growth" investment model.
Thor Industries (THOR), manufactures and sells various recreational vehicles (RV) throughout the United States and Canada, as well as related parts and accessories.
Its brand names include Airstream, Crossroads, Keystone and Heartland. In addition, it also produces truck and folding campers and equestrian, and other specialty towable recreational vehicles.
Thor is considered a "True Stalwart", according to our Peter Lynch methodology, based on its earnings growth of 19.29%.
This methodology looks for the "Stalwart" securities to gain 30%-50% in value over a two-year period if they can be purchased at an attractive price based on the P/E to Growth ratio.
When inventories increase faster than sales, it is a red flag. Inventory to sales for Thor was 6.14% last year, while for this year it is 6.14%. Since inventory to sales has not changed appreciably, the stock passes this test.
The yield-adjusted P/E/G ratio for Thor is 0.69, based on the average of the 3, 4 and 5 year historical earnings per share growth rates.
The EPS for a stalwart company must be positive. Thor's EPS of $4.32 would satisfy this criterion.
This methodology would consider the debt/equity ratio for Thor - which is currently zero - to be wonderfully low. This ratio is one quick way to determine the financial strength of the company.
By John Reese, Editor of Validea
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