![]() ![]() In terms of efficiency and profitability, the company has been in an uptrend as of the latest 10K report, however, with the above-mentioned misses on revenues and contracting margins, I wouldn't be surprised if ROIC, ROA, and ROE will show a dip in the next annual report.Įfficiency and Profitability metrics (Own Calculations) Speaking of liquidity, the current ratio is more than acceptable too, it has been hovering around 1.5 for a while now, meaning the company can cover its short-term obligations without a problem.Ĭurrent Ratio, expect a dip in the next annual report (Own Calculations) It would be ideal if the company starts to pay off the debt once again and bring it down as much as it can. The company does not have a problem in terms of paying off the debt as EBIT more than covers the interest expenses. The company seems to have added more debt recently after it was paying it off steadily in the previous years. This is good because they do have a lot of debt on their hands also, $1.7B as of the latest quarterly report. The company has a good amount of cash on hand and has been able to generate very good cash flow from operations over the last 5 years. With the increases in gas prices and higher interest rates, I could see people not making such a large purchase right now, as the loans might be too expensive to afford at this moment and may continue being like that for a little while longer. RV Sales Jan and Feb of '23 (RV Industry Association ()) RV Sales Feb '23 (RV Industry Association ()) RV shipments in the two months of '23 show substantial decreases, which may suggest that the trend will continue. The short-lived efficiency did not last a full year, which suggests the margins will be kept at around the historical levels for the foreseeable future, or even trend a little down also. Well above its average of the last 5 years, however, with the recent 540bps contraction, the margins more or less are back to where they have been previously. In terms of margins, the company for FY2022 saw a nice increase in gross margins. There is a lot to be pessimistic about in this industry as of right now. Inflation might pick back up with the said announcement as the Fed may have to tighten further for longer. The most recent surprising announcement by OPEC of cutting production is not going to help increase the demand for THO vehicles in the next year or so. The interest rates are still climbing, and the Fed will do whatever it takes to bring down inflation to its 2% long-term target. We haven't seen a big downturn in the economy yet. Speaking of the near future, it is not going to get better. It was only a matter of time before the company was going to take a hit, and a hit it took. I had a model of the company's financials completed after the company announced FY2022 results which were sometime in the summer of last year if I remember correctly, my assumptions back then were much more optimistic and the company looked quite under-valued, however, the writing was on the wall, with many articles coming out with sales declines in RV vehicles since then in the range of -30% to -40%. In this case, we can see that it is not looking good for THOR Industries. If you would look solely at annual reports, the company seems to be growing at good rates, however, to get a full picture of what is happening currently, quarterly reports give us a great gauge of how the company feels about the current demand for their products, the economic environment and their assumptions for the upcoming quarters. Gross margins will also take a hit in the full-year report. The management is guiding towards $10.5B -$11.5B revenue for the upcoming full year, which was lower than analysts' estimates. On top of that, gross margins also contracted quite a bit, 530bps. What happened to justify such a selloff? The management's guidance for the full year was adjusted down to reflect much tougher economic conditions that will persist for a while, revenues were down a whopping 39% from the quarter prior year, and EPS came in at 50 cents, which was well below analysts' estimates. ![]() It has not performed better since as the stock price tumbled even more, another 10% or so. The company took a big hit on the day of earnings for Q2, at one point was down 9% on the day. Coupled with such uncertainty in the economy, THOR Industries ( NYSE: THO ) will see more headwinds in the next 12-24 months before it could become a viable investment as it does have potential, but for now, it is a hold in my opinion. With the recent Q2 earnings coming in well under the expectations on the street and with forecasts for the full year adjusted to the downside, I had to adjust quite drastically my forecast models that would reflect the slowing demand for RVs in the US and Europe. ![]()
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