One of the cheapest stocks in our Large Cap 1000 Stock Screener is Thor Industries Inc (NYSE: THO).
Thor Industries Inc (Thor) is an American manufacturer of recreational vehicles through its subsidiaries. The company mainly sells vehicles in the United States and Canada. The company has two reporting segments: towable recreational vehicles and motorized recreational vehicles. The towable recreational vehicle reportable segment consists of the following operating segments: Airstream (towable), Bison, Heartland, CrossRoads, KZ, Keystone, and Livin’ Lite. The motorized recreational vehicle reportable segment consists of the following operating segments: Airstream (motorized) and Thor Motor Coach. The marketing and distribution is done through independent dealers that are generally not financed by the company.
A quick look at Thor’s share price history below over the past twelve months shows that the price is down 2%, but here’s why the company remains undervalued.
(Source: Google Finance)
The following data is from the company’s latest financial statements, dated April 2018.
The company’s latest balance sheet shows that Thor has $147 Million in total cash and cash equivalents. Further down the balance sheet we can see that the company has $80 Million in total debt. Therefore, Thor has a net cash position of $67 Million (cash minus debt).
Financial strength indicators show that the company has a Piotroski F-Score of 4, an Altman Z-Score of 8.11, and a Beneish M-Score of -2.26. All of which illustrate that the company remains financial strong.
If we consider that Thor currently has a market cap of $5.320 Billion, when we subtract the net cash totaling $67 Million that equates to an Enterprise Value of $5.253 Billion.
If we move over to the company’s latest income statements we can see that Thor has $685 Million* in trailing twelve month operating earnings which means that the company is currently trading on an Acquirer’s Multiple of 7.67, or 7.67 times operating earnings. That places Thor squarely in undervalued territory.
The Acquirer’s Multiple is defined as:
Enterprise Value/Operating Earnings*
*We make adjustments to operating earnings by constructing an operating earnings figure from the top of the income statement down, where EBIT and EBITDA are constructed from the bottom up. Calculating operating earnings from the top down standardizes the metric, making a comparison across companies, industries and sectors possible, and, by excluding special items–income that a company does not expect to recur in future years–ensures that these earnings are related only to operations.
It’s also important to note that if we take a look at the company’s latest cash flow statements we can see that Thor generated trailing twelve month operating cash flow of $434 Million and had $136 Million in Capex. That equates to $298 Million in trailing twelve month free cash flow, or a FCF/EV Yield of 6%.
In terms of Thor’s annualized Return on Equity (ROE) for the quarter ending April 2018. A quick calculation shows that the company had $1.748 Billion in equity for the quarter ending January 2018 and $1.866 Billion for the quarter ending April 2018. If we divide the combined total of both numbers by two we get $1.807 Billion. If we consider that the company has $461 Million in net income (ttm), that equates to an annualized Return on Equity (ROE) for the quarter ending April 2018 of 26%.
Other considerations regarding Thor include the company’s trailing twelve month revenues of $8.389 Billion, which are a record high, as is its operating income of $685 Million (ttm) and its net income of $461 Million (ttm). Thor’s trailing twelve month free cash flow of $298 Million is just 2% lower than the record high of $304 Million posted in FY2017.
Summary
In summary, Thor is trading on a P/E of 11.6 compared to its 5Y average of 16.78**, and an Acquirer’s Multiple of 7.67, or 7.67 times operating earnings. The company has a strong balance sheet with a net cash position of $67 Million and a cash-to-debt ratio of 1.84. Financial strength indicators show that Thor is financial sound with a Piotroski F-Score of 4, an Altman Z-Score of 8.11, and a Beneish M-Score of -2.26. The company also generates a FCF/EV Yield of 6% (ttm) and has an annualized return on equity of 26% for the quarter ending April 2018. Lastly, Thor’s trailing twelve revenues, operating income and net income are all at record highs, on an annualized basis.
(**Source: Morningstar)
Superinvestors Currently Holding Positions In Thor Industries Inc
There are a number of superinvestors currently holding positions in Thor including Steve Cohen, Chuck Royce, Jim Simons, Cliff Asness, Ron Muhlenkamp, Mario Gabelli, Jeremy Grantham.
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3 Comments on “TAM Stock Screener – Undervalued Thor Industries Inc (NYSE: THO)”
Piotroski score of 4 .. Is not a good sign !!
Thanks for the article
Goe,
I consider the company’s F-score of 4 ok when you include the Z-Score and M-Score.
I’m with Johnny here. F-score in isolation isn’t particularly predictive. F, Z and M are best used in combination to eliminate the worst stocks. That’s how we use it. If you’re a fundamental, discretionary investor, you might want to dig into the F-score gates that it failed on to see if they are material to the thesis. But a low score alone isn’t disqualifying.