Wall Street Looks Closely at 2 Leading RV Cos.

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Editor’s Note: Three Wall Street sources had this to say recently about two of the leading RV firms:

Barron’s Suggests Winnebago Stock Overvalued

Share prices of Winnebago Industries Inc. may reflect increased demand from “overzealous” investors who believe a hiring upturn will fuel increased leisure spending, newspaper Barron’s said in its April 5 edition.

Winnebago’s stock has more than quadrupled from its March 2009 low, which may reflect optimism about growing demand for its motorhomes, Barron’s said.

Shares of Winnebago now trade at what looks like an “exorbitant” 149 times expected 2010 earnings, and would trade at twice that of the leisure sector even if earnings per share rose to 55 cents in 2011 from an expected 10 cents in 2010, Barron’s said.

Earnings season can make investing tricky. Many investors try to time trades based on earnings announcements, but usually find such trading is inconsistent and risky. It is often better to take a look at how the market has reacted to a company’s results a few weeks after the initial announcement.

Thompson Upgrades Winnebago

Winnebago Industries was upgraded today (April 5) by analysts at Thomson Financial – Gradient and the stock is now at $15.07, up $0.33 (2.24%) on volume of 92,628 shares traded, according to Market Intelligence Center. Thomson Financial – Gradient upgraded the stock today to Buy from Hold. Over the last 52 weeks the stock has ranged from a low of $5.79 last April to a high of $16.44 in October. Winnebago Industries stock has been showing support around $14.35 and resistance in the $15.17 range.

One-Month Look-back at Thor Industries Inc.

Thor Industries Inc. released its earnings filing on March 8. The company reported a change in quarter-over-quarter sales of 89.7% and posted an EPS (trailing 12 months) of 1.13. Since then, the stock has posted a -13.38% gain (loss), according to learningmarkets.com.

By now the market has had time to settle in and look closely at the numbers. A stock’s performance in the few weeks following an announcement, compared to other stocks in its industry, the industry as a whole, and market as a whole, really tells you how investors and analysts felt about the announcement.

One way to gauge performance is look at a stock compared to other stocks in its industry with similar market caps. Thor peer Polaris Industries Inc. (PII) has seen a 8.39% stock price gain over about the last month, while another peer, Harley-Davidson Inc. (HOG) saw a 13.02% gain. So with a return of -13.38%, Thor saw less price gain than PII and under-performed HOG’s price performance over the last month. Thor Industries Inc. is the biggest stock in the industry by market cap.

Now, let’s see how Thor Industries Inc. stock performance compares to the rest of the market by looking at it compared to the Standard and Poors 500 index (.INX). Since March 8, the S&P 500 has returned around 3.51% and again, Thor saw about a -13.38% gain during that time. Could be better.

Since the announcement (about 30 days ago), the stock has posted a -13.38% gain (loss). Over that same period, the stock’s industry, recreational vehicles, saw a 6.68% gain. That means Thor has under-performed its industry as a whole, 300.3% since the earnings announcement. Small differences aren’t significant, but when the spread is large it indicates the stock is either much more or much less favored than its group as a whole.