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THO - Thor Industries


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PDF of financials and write up with figures/charts are attached.

 

Price: $100

Shares out: 55.6m

 

MCap: $5,555m

Cash: $337m

Debt: $1,633m

EV: $6,851m

 

TTM EBIT: $561m

NORM EBIT: $690m

 

EV/TTM EBIT: 12.2x

EV/NORM EBIT: 9.9x

 

TTM Earnings: $372m

NORM Earnings: $550m

NORM EPS: $9.90

 

P/E TTM: 14.9x

P/E NORM: 10.0x

 

Norm EBIT/Tangible Assets: ~40%

Tangible Assets: $1,700m

 

Thor Industries is the largest Recreational Vehicle (RV) Manufacturer in the world, with roughly 45% market share in North America and 30% market share in Europe. It was founded by Wade Thompson & Peter Orthwein in 1983, and thus the name THOR (TH from Thompson + OR from Orthwein). Peter Ortwein is currently Chairman of the Company (3.5% owner, ~$200m at current prices). Thor was started with the acquisition of Airstream and the Company has continually been built by acquisitions along with organic growth. Their philosophy is to allow acquired companies to operate independently, while collecting some of the benefits from scale (such as procurement of components).

 

The Company has fairly high returns on tangible assets of about 40%, and in my judgement, its acquisitions over time have been prudent. The stock has compounded at 14%/19%/18% annually over the last 10/20/30 years.

 

Thor made its largest acquisition in 2018 with the Euro 2.1b acquisition of Erwin Hymer - the Company's first foray into Europe. On the M&A call, it was noted that Erwin Hymer 2018 EBITDA was EUR 235 and 2019 expected EBITDA was EUR 300, which was not achieved. This is just mentioned for perspective while estimating a “normal” operating income for the European RV segment, which perhaps is currently under earning on a TTM basis.

 

The RV industry is highly cyclical and Thor, in my opinion, has done a good job of managing its business in such a way that it is able to remain profitable in all environments (albeit at a much reduced rate during troughs). Operating margins have averaged about 7% in the last 20 years, and dropped to a low of ~2% in 2009, when industry volumes troughed at 50% of 2007 volumes. Thor has maintained profitable operations for over 30 years.

 

Industry statistics show that there are about 10-11m RV Households in America. I expect RV sales to increase modestly with population growth over time and perhaps faster if the RV lifestyle increases in popularity. Perhaps about ~8% of US households own an RV, and my assumption is that this proportion may stay reasonably similar going forward.

 

The “Normalized EBIT” estimates are based on industry shipments of about 420k towable units and 50k motorized units in North America (historical numbers are shown in the attached chart). In the European RV segment, the estimates are based on a revenue figure about 8% higher than TTM.

 

I wouldn’t argue too much with an investor that would prefer to wait for a lower valuation, but I believe that from current prices, Thor will have considerably better returns than the market over time - granted that they will come, perhaps, in a lumpier manner.

 

A rough return profile may look as follows: ~$11b of sales in a few years with operating margins of 8%, leading to operating profit of ~$900m, and earnings of $640m. On a per share basis this would be about $11.50, capitalized at 15x would be ~$173 price per share. Adding about $21 of cumulative earnings per share over the next 3 years, the total value may be about $194/share. That would be a compounded annual rate of ~25% from today’s price.

THO_Write_up.pdf

THO_Financials.pdf

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