Despite a recent mild downturn, demand for recreational and outdoor activities is increasing. So, quality recreation stocks Brunswick Corporation (BC), Vista Outdoor Inc. (VSTO), and Johnson Outdoors Inc. (JOUT) could be wise additions to your portfolio.
According to a new Winnebago Industries survey, with Americans planning their summer travel and recreation, they are increasingly turning to the outdoors and road trips to improve their mental well-being and to offset the growing expenses of flights, accommodation, and car rentals.
Also, 82% of Americans participated in outdoor activities in 2022, up from 60% in 2020 and 79% in 2021. This trend is expected to continue through 2023, with 97% of people wanting to participate in outdoor activities.
Moreover, the recreational boat market in the U.S. is expected to reach $26.18 billion by 2027, increasing at an 8.3% CAGR. Recreational boats are popular in the United States for cruising, water sports, and fishing.
The market is evolving amid the expanding tourism industry and advancements such as joystick docking control and automatic trim controls.
Furthermore, the global leisure travel market is expected to reach $1.33 trillion by 2028 at a CAGR of 8.8%.
Take a detailed look at the stocks mentioned above:
Brunswick Corporation (BC)
BC is engaged in designing, manufacturing, and marketing recreation products worldwide. It operates through three segments: Propulsion; Parts & Accessories; and Boat. It offers products such as outboard, sterndrive, and inboard engines for independent boat builders, electrical products, boat parts and systems, engine oils, and lubricants.
BC’s trailing-12-month EV/EBITDA multiple of 6.48 is 32.8% lower than the industry average of 9.64. Its trailing-12-month EV/EBIT multiple of 7.87 is 43.9% lower than the industry average of 14.03.
BC’s trailing-12-month ROTA of 9.78% is 168.6% higher than the industry average of 3.64%. Its trailing-12-month ROTC of 13.29% is 116.1% higher than the industry average of 6.15%.
BC’s net sales increased 2.8% year-over-year to $1.74 billion in the first quarter that ended April 1, 2023. Also, its current liabilities came in at $1.44 billion for the period that ended April 1, 2023, compared to $1.49 billion for the period that ended December 31, 2022. Also, its total liabilities and shareholders’ equity came in at $6.29 billion, compared to $6.32 billion for the same period.
The consensus revenue estimate of $6.95 billion for the year ending December 2023 represents a marginally increase year-over-year. Its EPS is expected to grow 2.3% year-over-year to $10.26 for the same period. It surpassed EPS estimates in all four trailing quarters. BC’s shares have gained 23.7% over the past nine months to close the last trading session at $84.69.
BC’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.
BC has a B grade for Value, and Quality. It is ranked #8 out of 37 stocks in the Athletics & Recreation industry. Click here for the additional POWR Ratings for Stability, Growth, Sentiment, and Momentum for BC.
Vista Outdoor Inc. (VSTO)
VSTO in Anoka, Minn., designs, manufactures, and markets consumer products in the outdoor sports and recreation markets in the United States and internationally. The company operates through two segments: Shooting Sports and Outdoor Products.
VSTO’s trailing-12-month EV/EBITDA multiple of 5.39 is 44.2% lower than the industry average of 9.64. Its trailing-12-month EV/EBIT multiple of 6.74 is 51.9% lower than the industry average of 14.03.
VSTO’s trailing-12-month ROTC of 14.29% is 132.4% higher than the 6.15% industry average, while its trailing-12-month levered FCF margin of 10.36% is 180.9% higher than the industry average of 3.69%.
VSTO’s total current assets came in at $1.20 billion for the period that ended March 31, 2023, compared to $1.11 billion for the period that ended March 31, 2022. Also, its total assets came in at $2.80 billion, compared to $2.40 billion for the same period.
Street expects VSTO’s revenue to increase 4.2% year-over-year to $3.02 billion for the year ending December 2024. Its EPS is expected to grow 13.1% year-over-year to $5.24 for the same period. It surpassed EPS estimates in all four trailing quarters. Over the past nine months, the stock has gained 9.1% to close the last trading session at $28.68.
It’s no surprise that VSTO has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Value and Quality. It is ranked #6 in the same industry.
Beyond what is stated above, we’ve also rated VSTO for Growth, Sentiment, Momentum, and Stability. Get all VSTO ratings here.
Johnson Outdoors Inc. (JOUT)
JOUT designs, manufactures, and markets seasonal and outdoor recreational products for fishing worldwide. It operates through four segments: Fishing; Camping; Watercraft Recreation; and Diving. It offers products such as electric motors for trolling, marine battery chargers, military tents and accessories; camping furniture and stoves, etc.
JOUT’s forward EV/EBIT of 9.93x is 29.2% lower than the industry average of 14.03x. Its forward Price/Book of 1.11x is 56.6% lower than the industry average of 2.56x.
JOUT’s trailing-12-month ROTA of 6.35% is 74.2% higher than the industry average of 3.64%. Its trailing-12-month net income margin of 5.70% is 35.7% higher than the industry average of 4.20%.
For the second quarter that ended March 31, 2023, JOUT’s net sales increased 6.6% year-over-year to $202.12 million. Its gross profit increased 9.8% from the year-ago value to $75.34 million.
The company’s net income amounted to $14.86 million and $1.45 per share, representing increases of 50.1% and 49.5% from the prior-year quarter, respectively.
Analysts expect JOUT’s revenue to increase 2.6% year-over-year to $762.99 million for the year ending September 2023. Its EPS is expected to increase 8.5% year-over-year to $4.74 for the same period. The stock has gained 17.4% over the past nine months to close the last trading session at $57.05.
JOUT’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 #5 in the same industry. It has a B grade for Value and Sentiment. To see additional JOUT ratings for Momentum, Quality, Stability, and Growth, click here.
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BC shares were trading at $85.50 per share on Tuesday morning, up $0.81 (+0.96%). Year-to-date, BC has gained 19.78%, versus a 19.21% 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.
Should You Buy These 3 Recreation Stocks? StockNews.com
