What a brutal six months it’s been for THOR Industries. The stock has dropped 27% and now trades at $75.50, rattling many shareholders. This may have investors wondering how to approach the situation.
Is now the time to buy THOR Industries, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Do We Think THOR Industries Will Underperform?
Even with the cheaper entry price, we're sitting this one out for now. Here are three reasons you should be careful with THO and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, THOR Industries grew its sales at a weak 1.4% compounded annual growth rate. This was below our standards.
2. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for THOR Industries, its EPS declined by 4.3% annually over the last five years while its revenue grew by 1.4%. This tells us the company became less profitable on a per-share basis as it expanded.
3. New Investments Fail to Bear Fruit as ROIC Declines
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, THOR Industries’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
We cheer for all companies making their customers lives easier, but in the case of THOR Industries, we’ll be cheering from the sidelines. After the recent drawdown, the stock trades at 16.7× forward P/E (or $75.50 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. There are better stocks to buy right now. Let us point you toward one of our top software and edge computing picks.
Stocks We Would Buy Instead of THOR Industries
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