Valuation multiples

Valuation multiples are commonly used in highly capital intensive industries including recreational vehicle manufacturers to compare companies. We can use valuation multiples to compare companies that are similar in terms of size, financials, or business model. In this fashion, recreational vehicle maker Winnebago Industries’ (WGO) valuation multiples can be compared with its direct home market peer, Thor Industries (THO).

Winnebago’s valuation multiples

Winnebago’s forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple is 7.8x. This multiple is calculated based on the company’s estimated EBITDA for the next 12 months. About a year ago, its forward EV-to-EBITDA multiple was higher at 8.7x.

Currently, Thor’s EV-to-EBITDA multiple is at 6.5x, lower than Winnebago’s multiple. Similarly, Winnebago’s forward PE multiple is currently hovering at 10.3x, also much higher than Thor’s 8.7x.

Stock price movement comparison

In 2018, Winnebago stock fell by 56.5% as compared to 65.5% losses seen in Thor Industries stock. Winnebago is continuing to outperform Thor this year as well.

As of yesterday’s closing, Winnebago stock has yielded a solid 65.2% positive returns as compared to Thor’s 8.1% gains in 2019. In the second quarter so far, WGO has risen 28.4%, while Thor stock has seen 9.9% value erosion.

In the coming quarters, if Winnebago manages to turn its dismal motorhome sales trend to positive, it could boost the company’s future earnings estimates and drive its valuation multiples further up.

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