How Malibu Boats Capitalizes off of Choppy Waters

06/07/2016 8:00 am EST


Taesik Yoon

Editor, Forbes Investor and Forbes Special Situation Survey

Our latest featured buy makes boats are used for water sports such as water skiing, wakeboarding and wake surfing, as well as general recreational boating, explains Taesik Yoon, editor of Forbes Investor.

Malibu Boats (MBUU) derives most of its sales from the US — where it has been the market share leader since 2010 — but it also sells into Australia, Canada and other international regions.

Its flagship Malibu brand boats (68.1% of 3rd quarter volume) offer the latest innovations in performance, comfort and convenience, with models ranging in price from $60,000 to $130,000. 

Its Axis brand boats (31.9% of 3rd quarter volume), which range between $45,000 and $85,000, are designed to appeal to a wider customer base, as well as to younger enthusiasts.

They boast some of the industry’s most innovative features its Surf Gate technology allows users to surf on either side of the boat’s wake and its Power Wedge system gives boaters the ability to customize the size and shape of the boat’s wake with the push of a button.

While the quarterly earnings were in line with estimates, net sales fell slightly short.  This was primarily due to worsening sales trends in Australia and Canada — resulting from the depreciation in their currencies against the US dollar. 

MBUU is also predicting a slightly slower pace of growth in its much larger US retail business for 2016 from what it has enjoyed over the past several calendar years. 

We previously owned these shares and sold at its April high of $17.89, based on our belief that the prior 37% gain had largely priced in the favorable growth that was being projected for the second half of fiscal 2016. 

That being said, the resulting decline in the stock since our drop has been well over done in our view. 

Indeed, with some of biggest reasons for recommending MBUU the first time around remaining largely in place, we are optimistic that actual results — especially beyond the current quarter — will be strong enough to support a return to significantly higher price levels. 

If so, then the recent sell-off in its stock has created a great buying opportunity that could prove as profitable as it did before. As such, we are re again recommending the shares.

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