Amidst a daily loss of -11.71% and a three-month decline of -19.24%, BRP Inc (DOOO, Financial) still showcases an impressive Earnings Per Share (EPS) of 9.3. This raises an intriguing question for value investors: Is BRP (DOOO) significantly undervalued? The following analysis will delve into the company's valuation, guiding readers through a detailed exploration of BRP's market performance and intrinsic value.
Company Introduction
BRP Inc (DOOO, Financial) is a prominent name in the design, development, manufacture, distribution, and marketing of snowmobiles, all-terrain vehicles, and personal watercraft. With renowned brands like Ski-Doo, Sea-Doo, Can-Am, and Lynx, plus engines under the Rotax brand, BRP stands as a leader in recreational vehicles. Following the discontinuation of the Evinrude outboard engine business in 2020, the company expanded its marine group, acquiring several boat manufacturers. As of fiscal 2023, BRP's global presence is maintained through over 2,600 independent dealers and 150 distributors across approximately 130 countries. With a current stock price of $61.73 and a GF Value of $119.74, an evaluation of BRP's fair market value is imperative for investors.
Summarize GF Value
The GF Value is a proprietary metric that calculates the intrinsic value of a stock. It incorporates historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and projected future business performance. In essence, the GF Value Line suggests the fair trading value of the stock. When a stock's price significantly exceeds the GF Value Line, it may be overvalued, potentially leading to poor future returns. Conversely, if the price is well below this line, the stock could be undervalued, indicating a higher likelihood of positive future returns. Currently, BRP (DOOO, Financial) is significantly undervalued according to the GF Value, with a market cap of $4.20 billion and a stock price that suggests a promising long-term return potential.
Financial Strength
Investing in companies with robust financial strength is essential to mitigate the risk of capital loss. BRP's financial health can be assessed by examining metrics such as the cash-to-debt ratio and interest coverage. With a cash-to-debt ratio of 0.18, BRP's financial strength is rated 6 out of 10 by GuruFocus, signifying a fair position in comparison to its industry peers.
Profitability and Growth
Profitability is a critical indicator of a company's investment potential. BRP has shown consistent profitability over the past decade, with a notable operating margin of 13.62%, ranking higher than 87.3% of its industry counterparts. The company's profitability score is an impressive 10 out of 10.
Growth is equally important for valuation. BRP's average annual revenue growth of 24.3% outperforms 87.86% of the Vehicles & Parts industry, and its 3-year average EBITDA growth of 30.8% is higher than 81.51% of its industry competitors.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) provides insight into its profitability relative to capital costs. BRP's ROIC of 26.97 significantly surpasses its WACC of 9.29, indicating efficient capital use to generate profitable returns.
Conclusion
In summary, BRP (DOOO, Financial) presents as significantly undervalued with fair financial health and robust profitability. Its growth trajectory places it favorably within the Vehicles & Parts industry. For a more comprehensive view of BRP's financials, investors are encouraged to review 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.
