THOR Industries trades at $110.77 and has moved in lockstep with the market. Its shares have returned 9.1% over the last six months while the S&P 500 has gained 8.1%.
Is there a buying opportunity in THOR Industries, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think THOR Industries Will Underperform?
We're swiping left on THOR Industries for now. Here are three reasons there are better opportunities than THO and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, THOR Industries’s sales grew at a sluggish 3.3% compounded annual growth rate over the last five years. This was below our standard for the industrials sector.
2. EPS Barely Growing
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
THOR Industries’s unimpressive 4.3% annual EPS growth over the last five years aligns with its revenue performance. On the bright side, this tells us its incremental sales were profitable.
3. New Investments Fail to Bear Fruit as ROIC Declines
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, THOR Industries’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
We cheer for all companies making their customers lives easier, but in the case of THOR Industries, we’ll be cheering from the sidelines. That said, the stock currently trades at 22.8× forward P/E (or $110.77 per share). This multiple tells us a lot of good news is priced in - we think other companies feature superior fundamentals at the moment. Let us point you toward the most dominant software business in the world.
Stocks We Would Buy Instead of THOR Industries
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