BRP Inc (DOOO, Financial) has recently shown a daily gain of 4.92%, yet over the past three months, it has experienced a 6.4% decline. With an Earnings Per Share (EPS) of $7.07, investors are prompted to consider whether the stock is modestly undervalued. This article delves into a valuation analysis to determine the true worth of BRP (DOOO) and whether it presents an attractive investment opportunity.
Company Introduction
BRP Inc (DOOO, Financial), with a market capitalization of $5.30 billion, is a renowned manufacturer of recreational vehicles, including snowmobiles, all-terrain vehicles, and personal watercraft. The company operates under notable brand names such as Ski-Doo, Sea-Doo, Can-Am, and Lynx, and also produces engines under the Rotax brand. BRP's product distribution spans across a network of over 2,600 independent dealers and 150 distributors in roughly 130 countries. With a current stock price of $70.4 and a GF Value of $97.08, an intriguing question arises: is BRP (DOOO) indeed modestly undervalued?
Summarize GF Value
The GF Value is a unique metric that estimates the intrinsic value of a stock. It incorporates historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. When a stock trades significantly below this calculated GF Value, it suggests the stock may be undervalued, potentially offering higher future returns. Conversely, trading above the GF Value could imply an overvalued stock with poorer future returns. Currently, BRP (DOOO, Financial) is trading below its GF Value, indicating that the stock could be modestly undervalued and may present a favorable long-term investment opportunity.
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Financial Strength
Before investing, evaluating a company's financial strength is crucial. BRP's cash-to-debt ratio of 0.2 places it lower than 74.24% of its industry peers, signifying a fair financial strength rating of 6 out of 10. This assessment reflects the company's ability to manage its debt responsibly in relation to its cash reserves.
Profitability and Growth
Profitability is a key indicator of a company's financial health, and BRP has a solid track record with 10 years of profitability in the last decade. With a robust operating margin that surpasses 86.05% of its competitors, BRP's profitability is considered strong. Additionally, the company's growth metrics are impressive, with a 3-year average annual revenue growth of 25.3%, placing it ahead of 88.11% of the industry. Its EBITDA growth rate also stands out, signaling a company with robust growth prospects.
ROIC vs. WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) is an effective way to gauge value creation. BRP's ROIC of 21.47 significantly exceeds its WACC of 8.47, indicating that the company is effectively generating returns on its investments, a promising sign for potential investors.
Conclusion
Considering the financial strength, profitability, and growth prospects, BRP Inc (DOOO, Financial) appears to be modestly undervalued. This assessment suggests that the stock could offer a favorable return on investment over time. To gain a deeper understanding of BRP's financials, investors can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
