The sports and athletics market is predicted to grow due to increased health awareness and advancements in technology.
So, quality athletic stocks MasterCraft Boat Holdings, Inc. (MCFT), Skechers U.S.A., Inc. (SKX) and BRP Inc. (DOOO) could be wise additions to your portfolio now.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the athletic industry.
The athletic industry is benefiting from a cultural trend toward health and wellness, as people invest in their well-being and embrace healthier lifestyles. Companies are offering new products and services while embracing social media and influencer marketing to reach a larger audience.
The sports apparel industry is expected to reach $75.60 billion by 2027, rising at a CAGR of 6.8%. The resurgence of major athletic events, as well as the continued popularity of outdoor and home-based sports, are likely to drive growth in the market. Sports apparel that is fashionable and functional is in high demand, with companies manufacturing creative and functional items.
In addition, the global athletic footwear market is expected to reach $180.20 million by 2031, with a 4.6% CAGR.
Considering these conducive trends, let’s look at the fundamentals of the three Athletics & Recreation stock picks, beginning with number 3.
Stock #3: MasterCraft Boat Holdings, Inc. (MCFT)
MCFT designs, manufactures, and markets recreational powerboats. It operates through four segments: MasterCraft; Crest; NauticStar; and Aviara.
MCFT’s trailing-12-month EV/EBITDA multiple of 6.07 is 32.2% lower than the industry average of 8.95. Its trailing-12-month EV/EBIT multiple of 8.17 is 34.2% lower than the industry average of 12.41.
MCFT’s trailing-12-month ROTC of 32.77% is 432.4% higher than the 6.16% industry average, while its trailing-12-month levered FCF margin of 13.74% is 169.6% higher than the industry average of 5.09%.
During the fiscal year 2023 (ended June 30), MCFT’s net sales increased 3.2% year-over-year to $662.05 million. Its adjusted EBITDA increased marginally from the year-ago value to $131.45 million.
The company’s adjusted net income and EPS came in at $95.02 million and $5.35, representing increases of 1.8% and 6.8% year-over-year, respectively.
Street expects MCFT’s EPS and revenue for the current quarter ending December 31, 2023, to be $0.32 and $89.19 million, respectively. Its EPS is expected to increase by 10% per annum over the next five years. It surpassed the consensus EPS estimates in each of the trailing four quarters. Shares of MCFT has lost marginally intraday to close the last trading session at $20.58.
MCFT’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
MCFT also has a B grade for Value and Quality. It is ranked #6 out of 37 stocks in the Athletics & Recreation industry. Click here to see the additional POWR Ratings for Growth, Stability, Momentum and Sentiment for MCFT.
Stock #2: Skechers U.S.A., Inc. (SKX)
SKX designs, develops, markets, and distributes footwear for men, women, and children worldwide. The company operates through two segments; Wholesale and Direct-to-Consumer. It offers products under the Skechers USA, Skechers Sport, Skechers Active, Modern Comfort, etc.
SKX’s forward EV/Sales multiple of 1.02 is 5.8% lower than the industry average of 1.08. Its forward EV/EBIT multiple of 10.68 is 14% lower than the industry average of 12.41.
SKX’s trailing-12-month net income margin of 6.11% is 40.9% higher than the 4.33% industry average. Its trailing-12-month ROCE of 13.08% is 15.4% higher than the 11.34% industry average.
SKX’s sales increased 7.8% year-over-year to $2.03 billion in the third quarter that ended September 30, 2023, while its gross profit rose 21.3% from the year-ago value to $1.07 billion.
Its net earnings grew 69.3% and 69.1% from the prior-year quarter to $145.40 million and $0.93 per share, respectively. Also, its earnings from operations increased 64% from the year-ago value to $213.20 million.
The consensus revenue estimate of 8.05 billion for the year ending December 2023 represents an 8.2% increase year-over-year. Its EPS is expected to grow 44.6% year-over-year to $3.44 for the same period. It has surpassed EPS estimates in three of four trailing quarters. SKX’s shares have gained 44.3% over the past year to close the last trading session at $46.78.
SKX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #3 in the same industry. It has an A grade for Sentiment and a B for Growth and Value. To see additional SKX’s ratings for Momentum, Stability and Quality, click here.
Stock #1: BRP Inc. (DOOO)
Headquartered in Valcourt, Canada, DOOO designs, develops, manufactures, distributes, and markets power sports vehicles and marine products in North America, Europe, Australia, New Zealand, and Latin America.
DOOO’s forward non-GAAP P/E multiple of 7.41 is 44.4% lower than the industry average of 13.32. Its forward EV/EBIT multiple of 6.49 is 47.7% lower than the industry average of 12.41.
DOOO’s trailing-12-month ROCE of 255.41% is significantly higher than the industry average of 11.34%. Its trailing-12-month ROTC of 29.56% is 380.3% higher than the industry average of 6.16%.
In the fiscal 2024 second quarter that ended July 31, 2023, DOOO’s revenues increased 13.9% year-over-year to CAD2.78 billion ($2.03 billion). Its gross profit grew 15.7% from the year-ago value to CAD697.60 million ($509.05 million). The company’s normalized EBITDA came in at CAD473.10 million ($345.23 million), up 13.1% year-over-year.
In addition, the company’s net income and EPS increased 42.3% and 44.9% year-over-year to CAD338.70 million ($247.16 million) and CAD4.26, respectively.
Analysts expect DOOO’s revenue to increase 8.6% year-over-year to $7.94 billion for the year ending January 2024. Its EPS is expected to grow 4.5% year-over-year to $9.17 for the same period. It surpassed EPS estimates in all the four trailing quarters. The stock has gained marginally over the past year to close the last trading session at $67.96.
It’s no surprise that DOOO has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Value. It is ranked #2 in the same industry.
Beyond what is stated above, we’ve also rated DOOO for Growth, Stability, Sentiment, Momentum and Quality. Get all DOOO ratings here.
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SKX shares were trading at $47.51 per share on Friday afternoon, up $0.73 (+1.56%). Year-to-date, SKX has gained 13.25%, versus a 9.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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