STOCK WATCH


Thor: Wheels on Fire

This leading RV maker appears to be on the road to prosperity, and the company should attract more attention as it continues to perform well.



With 350,000 Americans turning 55 each month, the recreational vehicle industry has the wind at its back. Leading RV maker Thor Industries (symbol THO) is the best way to invest in the sector, says Elliott Schlang of Great Lakes Review, a stock research firm. Thor markets its RVs under numerous names, including Airstream and Dutchmen.

Schlang is bullish on the stock even though it has risen from $27 to $42 since last May. Thor still sells at just 16 times Schlang's earnings-per-share estimate of $2.57 for the fiscal year ending July 31 and 15 times his estimate of $2.80 for the following fiscal year. He thinks earnings per share will continue to grow 15% annually over the next three to five years.

Worries over gasoline prices and interest rates have kept the stock from rising even more, says Schlang. But these concerns are overblown, he says. Most RV owners generally drive their vehicles only about 5,000 miles per year, he says, and most are relatively affluent. Indeed, about half of all customers buy their RVs with cash.

Thor looks great on paper. Its return on equity, a measure of profitability, is 23%. Its stock sells at less than one times sales, and the Jackson Center, Ohio, company has a $473 million backlog of orders. Thor has no debt and about $3.40 per share in cash and securities. Executives own 37% of the stock, which means that their interests should be aligned with those of shareholders.

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The RV business contains many small players. Thor has been a savvy acquirer of smaller competitors. One final plus: The company, which is followed by only a half-dozen analysts, is still largely unknown by institutional investors. Why? One possibility, Schlang speculates, is that Thor doesn't often use investment bankers. As the company continues to perform well, though, it will attract more analyst coverage. Indeed, Citigroup just started following Thor in January, with a buy recommendation.

--Steven Goldberg




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