During the pandemic, outdoor and recreational activities were impacted but have bounced back strongly. People are now participating in activities like camping, fishing, surfing, skiing, climbing, and skateboarding more than ever, spearheading the growth of the recreation industry.
Amid this backdrop, it could be wise to buy fundamentally strong recreation stocks Marine Products Corporation (MPX), MasterCraft Boat Holdings, Inc. (MCFT), and American Outdoor Brands, Inc. (AOUT).
Before diving deeper into the fundamentals of these stocks, let’s discuss why the recreation industry is well-positioned for growth.
The recreation industry experienced a shift in consumer behavior during the pandemic, leading to a decline in outdoor sports and recreational activities. However, with restrictions getting eased, there has been a surge in Americans engaging in their favorite outdoor activities as they focus on their physical and mental well-being, leading to a strong resurgence in the recreation industry.
People are flocking outdoors to participate in recreational activities they enjoy. Hence, there is a growing demand for sportswear, athletic footwear, sports, and fitness equipment, powerboats, and other outdoor and recreational products. A joint report by the Outdoor Industry Association (OIA) and Outdoor Foundation (OF) showed that 55% of the U.S. population over six participates in outdoor activities.
The sports and outdoor market revenue will reach $22.88 billion in 2023. Additionally, revenue is expected to grow at a CAGR of 10.7% to reach $34.37 billion by 2027.
Let's take a closer look at their fundamentals.
Marine Products Corporation (MPX)
MPX designs, manufactures, and sells recreational fiberglass powerboats for the sportboat and sport fishing boat markets worldwide. The company offers Chaparral sterndrive pleasure boats, Chaparral outboard pleasure boats, and Robalo outboard sport fishing boats.
In terms of the trailing-12-month EBITDA margin, MPX’s 13.35% is 25.7% higher than the 10.62% industry average. Likewise, its 10.91% trailing-12-month levered FCF margin is 153.1% higher than the 4.31% industry average. Furthermore, the stock’s 2.61x trailing-12-month asset turnover ratio is 161.8% higher than the 1x industry average.
MPX’s net sales for the second quarter ended June 30, 2023, increased 21.2% year-over-year to $116.16 million. Its gross profit rose 24.6% year-over-year to $28.66 million. The company’s net income increased 43.9% year-over-year to $14.32 million. Also, its EPS came in at $0.42, representing an increase of 44.8% year-over-year. In addition, its EBITDA increased 25.9% year-over-year to $17.10 million.
Over the past nine months, the stock has gained 53.4% to close the last trading session at $16.18.
MPX’s POWR Ratings reflect strong prospects. It has an overall rating of A, translating to a Strong Buy in our proprietary system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked first out of 37 stocks in the Athletics & Recreation industry. It has a B grade for Growth, Sentiment, and Quality. Click here to see MPX’s Value, Momentum, and Stability ratings.
MasterCraft Boat Holdings, Inc. (MCFT)
MCFT designs, manufactures, and markets recreational powerboats. It operates through four segments: MasterCraft, Crest, NauticStar, and Aviara.
On July 19, 2023, MCFT announced its 2024 lineup of boats, featuring several exciting enhancements. The NXT models now come with an easy-to-use touchscreen and three different Rapid Surf waves to suit various skill levels. The XStar S, XT, and X models also have standard underwater exhaust, reducing noise and enhancing air quality.
In terms of the trailing-12-month EBITDA margin, MCFT’s 17.38% is 63.7% higher than the 10.62% industry average. Likewise, its 2.41x trailing-12-month asset turnover ratio is 141.4% higher than the 1x industry average. Additionally, the stock’s 15.52% trailing-12-month EBIT margin is 115.7% higher than the 7.20% industry average.
For the fiscal third quarter that ended April 2, 2023, MCFT’s net sales came in at $166.78 million. The company’s adjusted net income came in at $24.12 million. Its adjusted EPS was flat year-over-year at $1.36. In addition, its adjusted EBITDA came in at $32.99 million.
For fiscal 2023, MCFT’s EPS is expected to increase 11.4% year-over-year to $5.06. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 33.2% to close the last trading session at $28.19.
MCFT’s positive outlook is reflected in its POWR Ratings. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has a B grade for Growth, Value, and Quality. It is ranked #2 in the same industry. To see MCFT’s Momentum, Stability, and Sentiment ratings, click here.
American Outdoor Brands, Inc. (AOUT)
AOUT provides outdoor products and accessories for rugged outdoor enthusiasts. It offers hunting, fishing, camping, shooting, and personal security and defense products. The company also provides shooting sports accessories, including rests, vaults, and other related accessories, outdoor lifestyle products; land management tools; harvesting products; outdoor cooking products.
On July 11, 2023, AOUT announced that BUBBA, its fishing brand, will partner with Major League Fishing (MLF), featuring BUBBA Pro Series Smart Fish Scale as MLF's official scale for the 2024 Bass Pro Tour season. The BUBBA Pro SFS offers accuracy, reliability, and ease of use, empowering pros and aspiring anglers.
AOUT’s CEO Brian Murphy said, "We are thrilled to be named the official scale of Major League Fishing. BUBBA has always been committed to providing anglers with the absolute best tools, and our smart scale is no exception. We are proud to support MLF's ambitious vision for the future of bass fishing."
In terms of the trailing-12-month gross profit margin, AOUT’s 46.06% is 30.1% higher than the 35.41% industry average. Likewise, its 15.08% trailing-12-month levered FCF margin is 249.7% higher than the 4.31% industry average.
AOUT’s net sales for the fourth quarter ended April 30, 2023, came in at $42.20 million. Its non-GAAP gross profit came in at $19.07 million. The company’s non-GAAP operating income came in at $800 thousand, while its non-GAAP net income came in at $793 thousand.
Also, its adjusted net income per share came in at $0.06. Additionally, its adjusted EBITDA came in at $1.80 million.
Analysts expect AOUT’s EPS and revenue for the quarter ending January 31, 2024, to increase 48.7% and 7.5% year-over-year to $0.19 and $54.72 million, respectively. Over the past year, the stock has gained 26.7% to close the last trading session at $9.26.
AOUT’s POWR Ratings reflect solid prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Value and Sentiment and a B for Growth and Quality. Within the Athletics & Recreation industry, it is ranked #3. Click here to see AOUT’s ratings for Momentum and Stability.
What To Do Next?
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MPX shares were trading at $16.26 per share on Friday afternoon, up $0.08 (+0.49%). Year-to-date, MPX has gained 40.92%, versus a 19.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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