As the Covid-19 vaccination rate increases, more people are going on vacations again. The demand for travel is shaping up to be even more robust due to many people previously being unable to travel during 2020.
The increase in travel demand has resulted in an uptick in demand for recreational vehicles. Undoubtedly, this is a good opportunity for the RV market to capitalize on this momentum, and for players in this space to expand their operations.
This is why Camping World Holdings Inc. (CWH, Financial), a well-known retailer of RVs and outdoor products in the U.S., currently ranks high among sell-side analysts on Wall Street. The street has issued five strong buy recommendation ratings and six buy ratings for the stock, with an average target price of $55 per share that reflects a 42.5% upside from the share price of $38.60 at close on Tuesday. The market cap is $3.42 billion.
The stock has grown 46% so far this year following strong unit growth and a better-than-expected profit margin improvement reported in the first quarter of 2021. The number of new and used recreational vehicles sold jumped nearly 39% to 31,752 units, giving a huge help to the gross margin, up 395 basis points to 33.4%, and the adjusted Ebitda margin, up 870 basis points to 12.2%.
The strong market for recreational vehicles is going to create strong tailwinds, and Camping World Holdings thinks that an effective strategy based on business expansion will pay off. Following three important acquisitions, which should be completed this summer, the company plans to increase its dealerships in Minnesota, open a facility in the state of Vermont and step into the van and camper conversion submarket. Currently, the company operates approximately 175 dealerships located in 38 states of the United States. The company is also selling through appropriate channels of e-commerce.
For full-year 2021, Camping World Holdings targets adjusted Ebitda of $770 million to $810 million. Based on analysts’ expectations for total revenue of $6.74 billion, the adjusted Ebitda margin should yield around 11.4%, for a 100-basis points improvement from 10.4% last year.
The stock appears cheap, as its price-earnings ratio is 8.17 versus the industry median of 21.78 and its price-sales ratio is 0.45 versus the industry median of 0.9. The 52-week range is $22.60 to $49.20. The 50-day moving average is $39.82, while the 200-day moving average is $38.21.
The company paid a cash quarterly dividend of 25 cents per common share on June 29, leading to a forward dividend yield of 2.56% as of Tuesday.
