Top Picks 2017: Thor Industries

01/12/2017 6:00 am EST


Richard Moroney

Editor, Dow Theory Forecasts

As the largest maker of recreational vehicles, this Top Pick for 2017 looks well-positioned in an industry rejuvenated by millennials and retiring baby boomers, observes Richard Moroney in his small-cap newsletter, Upside.

Thor Industries (THO) expects 2017 to be one of the strongest years for the RV industry since the 1970s.

The prospect of higher gasoline prices seems unlikely to derail the RV rebound, given that growth is being driven by smaller and more fuel-efficient motorized RVs and towable trailers.

Thor’s backlog has doubled to $2.11 billion in the past year and currently accounts for nearly half of annual sales.

Analysts expect per share profits for fiscal 2017 ending July to surge 29% on 48% higher revenue.

The $576 million acquisition of smaller rival Jayco, completed in June, should also help augment year-ahead growth. Thor has spent $931 million on acquisitions over the past three years.

The shares have surged 82% in the past year, pushing the trailing P/E ratio to 19. But its Value score, currently 66, remains attractive.

The stock trades at 16 times estimated fiscal 2017 profits, roughly in line with the median for S&P 1500 consumer-discretionary stocks.

Annual operating cash flow has risen in seven straight years, supporting a dividend that has grown at an annualized rate of 15% over the past five years. Thor, yielding 1.3%, is a “Best Buy”.

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