The boating industry has seen immense growth in recent years. And it is well-placed to witness continued momentum this year, with sustained demand for boats as people sought outdoor recreational activities with various health benefits. Moreover, a noticeable shift toward eco-friendly and technologically advanced boating options should drive the industry’s growth.
As the weather heats up, investors could consider buying quality boating stocks Malibu Boats, Inc. (MBUU), MasterCraft Boat Holdings, Inc. (MCFT), and Marine Products Corporation (MPX), which are well-poised to capitalize on the industry tailwinds.
Before discussing the fundamentals of these stocks in detail, let’s take a look at what’s happening in the boating industry.
After witnessing significant growth in recent years, the boating industry is expected to demonstrate continued strength in 2023 and beyond. Demand for boating and consumer interest is increasing rapidly as more Americans seek boating as an outdoor activity with numerous health benefits.
Furthermore, several technological advancements in boats and boat engines are accelerating the industry’s expansion. One of the most significant technological advancements in the boating industry is using artificial intelligence (AI) to assist with navigation. Another breakthrough technology that is transforming the industry is electric propulsion.
Electric-powered boats are environmentally friendly compared to traditional gasoline-powered boats. Other options for environmentally conscious boaters are solar-powered boats and hydrogen fuel cell-powered boats.
According to the National Marine Manufacturers Association (NMMA), for 2023, early indications point to continued strong demand, with new retail units expected to be on par with 2022.
“Last year was a healthy year for recreational boating with momentum coming off of record sales in 2021 due to continued demand and the fact that supply chain shortages prevented our industry from overproducing like we saw happen in other sectors over the past two years, said Frank Hugelmeyer, NMMA president.
According to a report by Research and Markets, the global market for leisure boats is expected to reach a size of $52.90 billion by 2030, growing at a CAGR of 4.1%.
Therefore, adding fundamentally strong boating stocks MBUU, MCFT, and MPX to your summer portfolio could be wise, given the industry’s promising prospects.
Let’s take a closer look at the fundamentals of these stocks:
Malibu Boats, Inc. (MBUU)
MBUU designs, manufactures, markets, and sells a range of recreational powerboats. The company operates through three segments: Malibu; Saltwater Fishing; and Cobalt. It offers performance sports boats; and sterndrive and outboard boats under the Malibu, Pursuit, Axis, Cobia, Maverick, Hewes, and Cobalt brands.
MBUU’s forward non-GAAP P/E of 6.86x is 49.7% lower than the industry average of 12.63x. Likewise, the stock’s forward EV/Sales and EV/EBITDA multiples of 0.90 and 4.57 are 18.7% and 50.8% lower than the industry averages of 1.11 and 9.30, respectively.
For the fiscal 2023 second quarter ended December 31, 2022, MBUU’s net sales increased 28.4% year-over-year to $338.73 million. The increase in net sales was driven mainly by improved unit volumes across all three segments and inflation-driven year-over-year price increases. Its gross profit was $75.65 million, an increase of 19% year-over-year.
Furthermore, the company’s adjusted EBITDA rose 19.7% from the year-ago value to $57.61 million. Its adjusted fully distributed net income increased 19% year-over-year to $38.83 million. MBUU’s adjusted fully distributed net income per share of Class A common stock came in at $1.83, up 22% year-over-year.
The consensus revenue estimate of $1.31 billion for the fiscal year (ending June 2023) indicates a 7.4% increase year-over-year. The company’s EPS for the current year is expected to grow 1.8% year-over-year to $8.05. Also, MBUU has surpassed the revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Shares of MBUU have gained 6.3% over the past six months and 6.4% over the past year to close the last trading session at $55.25.
MBUU’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
MBUU has a B grade for Growth and Value. In the 37-stock Athletics & Recreation industry, it is ranked #4. Click here to see additional POWR Ratings for MBUU for Momentum, Sentiment, Quality, and Stability.
MasterCraft Boat Holdings, Inc. (MCFT)
MCFT designs, manufactures, and markets recreational powerboats. The company operates through four segments: MasterCraft; Crest; NauticStar; and Aviara. It provides recreational performance sport boats for water skiing, wakeboarding, and wake surfing; pontoon boats for general recreational boating; and luxury day boats.
On February 8, 2023, MCFT raised its guidance for the full year 2023 based on its strong performance and incremental retail demand visibility. “Our guidance continues to reflect the potential for a range of retail demand scenarios as we approach the all-important summer selling season, said Fred Brightbill, CEO and Chairman of MCFT.
For the full-year fiscal 2023, MCFT’s consolidated net sales are expected to be between $620 million and $640 million. The company expects its adjusted EBITDA to arrive between $111 million and $118 million and adjusted EPS between $4.40 and $4.66. For the third quarter, its consolidated net sales are expected to be nearly $158 million, with adjusted EPS of approximately $1.04.
On November 2, 2022, MCFT announced an expansion of its popular entry-level NXT lineup with the all-new 2023 NXT21 and NXT23. The new models deliver best-in-class wave performance, added storage, spacious hybrid bow design, and standard telematics. The new launches are expected to boost the company’s growth and profitability.
In terms of forward non-GAAP P/E, MCFT is currently trading at 6.20x, which is 54.6% lower than the industry average of 13.63x. Also, its forward EV/EBITDA of 4.01x is 56.8% lower than the industry average of 9.30x.
For the second quarter that ended January 1, 2023, MCFT’s net sales increased 10.2% year-over-year to $159.19 million, while its gross profit rose 5.1% from the year-ago value to $38.23 million. The company’s adjusted EBITDA grew 9.8% year-over-year to $29.82 million. Its adjusted net income and adjusted net income per share came in at $21.27 million and $1.20, up 11% and 18.8% year-over-year.
Street expects the company’s EPS to grow 10% per annum over the next five years. Moreover, MCFT has surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has gained 30.9% over the past six months and 14.6% to close the last trading session at $28.27.
MCFT’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our POWR Ratings system.
The stock has a grade B for Value and Quality. MCFT is ranked #2 of 37 stocks in the Athletics & Recreation industry.
Beyond what is stated above, we have also rated MCFT for Momentum, Growth, Sentiment, and Stability. Get all MCFT ratings here.
Marine Products Corporation (MPX)
MPX designs, manufactures, and sells recreational fiberglass powerboats for the sport boat and fishing boat markets globally. The company provides Chaparral sterndrive pleasure boats, such as Si Sport Boats, SSX Sport Boats, and the Surf Series; Chaparral outboard pleasure boats, including OSX Luxury Sportboats and SSi outboard models; and Robalo outboard sport fishing boats.
In terms of trailing-12-month P/E, MPX is trading at 11.20x, 25.2% lower than the industry average of 14.97x. The stock’s trailing-12-month EV/EBITDA multiple of 7.51 is 21.7% lower than the industry average of 9.60. Moreover, its forward Price/Cash Flow of 9.23x is 19.3% lower than the industry average of 11.43x.
MPX’s net sales increased 41.8% year-over-year to $108.51 million in the fourth quarter that ended December 31, 2022. The increase in net sales was primarily due to a 29% rise in the number of boats sold during the quarter and a 12% increase in the average selling price per boat.
In addition, MPX’s EBITDA came in at $15.34 million, an increase of 37.8% year-over-year. Its net income was $11.86 million, up 40.4% year-over-year, and its EPS rose 40% year-over-year to $0.35.
MPX’s stock has gained 11.3% over the past month and 48.4% over the past six months to close the last trading session at $13.22.
MPX’s POWR Ratings reflect its sound fundamentals and promising prospects. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
MPX has a B grade for Growth, Quality, Stability, and Growth. It is ranked first among the 37 stocks in the same industry.
In addition to the POWR Ratings I’ve highlighted, you can see MPX’s ratings for Momentum and Value here.
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MBUU shares were unchanged in premarket trading Wednesday. Year-to-date, MBUU has gained 3.66%, versus a 6.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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