Here's Why We Think Winnebago Industries (NYSE:WGO) Is Well Worth Watching

By
Simply Wall St
Published
March 19, 2022
NYSE:WGO
Source: Shutterstock

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In contrast to all that, I prefer to spend time on companies like Winnebago Industries (NYSE:WGO), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Winnebago Industries

Winnebago Industries's Earnings Per Share Are Growing.

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. I, for one, am blown away by the fact that Winnebago Industries has grown EPS by 42% per year, over the last three years. Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Winnebago Industries shareholders can take confidence from the fact that EBIT margins are up from 6.8% to 12%, and revenue is growing. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

earnings-and-revenue-history
NYSE:WGO Earnings and Revenue History March 19th 2022

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Winnebago Industries's forecast profits?

Are Winnebago Industries Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Winnebago Industries insiders have a significant amount of capital invested in the stock. Given insiders own a small fortune of shares, currently valued at US$89m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.

Should You Add Winnebago Industries To Your Watchlist?

Winnebago Industries's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So to my mind Winnebago Industries is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. We should say that we've discovered 2 warning signs for Winnebago Industries (1 doesn't sit too well with us!) that you should be aware of before investing here.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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