Small Cap Winnebago Industries (WGO): Time to Bet on Recovery With This RV Stock? DW, SKY & THO

The CEO of recreation vehicle (RV) stock Winnebago Industries, Inc (NYSE: WGO) recently appeared on CNBC to say that the economy is improving for RV makers, meaning its time to take a closer look at the stock plus take a look at the performance of other small cap RV stocks like Drew Industries, Inc (NYSE: DW), Skyline Corporation (NYSEMKT: SKY) and Thor Industries, Inc (NYSE: THO).

What is Winnebago Industries, Inc?

Incorporated under the laws of the state of Iowa on February 12, 1958, small cap Winnebago Industries is a manufacturer of RVs, which are used primarily in leisure travel and outdoor recreation activities. Specifically, the company builds motor homes, travel trailers and fifth wheel products under the Winnebago®, Itasca®, Winnebago Touring Coach™, SunnyBrook®, and Metro™ brand names and then markets these recreational vehicles on a wholesale basis to a diversified dealer organization located throughout the US and Canada. Other products manufactured by the company consists of original equipment manufacturing (OEM) parts, including extruded aluminum and other component products for other manufacturers and commercial vehicles.

As for potential small cap RV peers, Drew Industries is a leading supplier to the recreational vehicle and manufactured homes industries, through its wholly-owned subsidiaries, Lippert Components, Inc and Kinro, Inc; Skyline Corporation is a manufacturer of manufactured and modular housing along with travel trailers, ultra lite trailers and recreational vehicles; and Thor Industries which divested its bus business in 2013 to focus on its core RV business, is one of the world's largest manufacturers of recreational vehicles.

What You Need to Know or Be Warned About Winnebago Industries

During last Wednesday's CNBC interview, Winnebago Industries' CEO Randy Potts commented how the financial crisis and subsequent recession had been a train wreck for the RV industry – which went from record setting high sales to record setting low sales. Potts believes the RV industry is in a recovery phase now that will continue for four good reasons:

Energy prices plus energy availability are favorable. Interest rates are attractive. Housing market is healing. Demographics are favorable.

When asked about the practicality of powering RVs in the future with increasingly plentiful natural gas, Potts commented that it would require too much space on the vehicle due to the relative lack of a natural gas for vehicle infrastructure and that lack of infrastructure is also a problem because the RV lifestyle not about being tied down. He then noted how Winnebago is a premium iconic brand that sells at a higher price and that margins have grown quarter over quarter for the last year. Potts ended the interview by saying:

"Naturally during the recession it was -- again, it was very hard, but we survived that. We're one of some companies that didn't survive, and, you know, we're coming back with a vengeance and we're hitting it very hard and very successful with it."

In late March, Winnebago Industries reported earnings for the second quarter of Fiscal 2014 ended March 1, 2014 with revenues rising 29% to $228.8 million for a a better-than-expected 53% jump in net income to $9.6 million as the company sold more motorhomes to dealers in a quarter otherwise impacted by storm-related disruptions. CEO Potts commented:

"We achieved strong results for the quarter, notwithstanding challenges associated with the severe winter weather.  Although we scheduled four additional production days to satisfy motorized backlog, the severe weather conditions caused numerous work delays and closures at both our Iowa and Indiana facilities, which led to the loss of multiple production days, and contributed to increased expenses due to inefficiencies that limited margin expansion and earnings growth."

Winnebago Industries had also recently announced a large incremental rental order from Apollo Motorhome Holidays, an RV rental company, to be delivered during the company's Fiscal 2014 third quarter.  The order is for approximately 500 units with Winnebago Industries having contractually agreed to repurchase up to two thirds of the units at specified prices after one season of rental use.  

Otherwise, it should be mentioned that Winnebago Industries has a trailing P/E of 18.35 and a forward P/E of 13.72.

Share Performance: Winnebago Industries vs DW, SKY & THO

On Monday, small cap Winnebago Industries fell 1.39% to $25.51 (WGO has a 52 week trading range of $16.72 to $32.41 a share) for a market cap of $694.87 million plus the stock is down 5.45% since the start of the year, up 43.7% over the past year and up 266.5% over the past five years. Here is a look at the performance of RV stock Winnebago Industries verses Drew Industries, Skyline Corporation and Thor Industries:

As you can see from the above performance chart, RV stocks Winnebago Industries, Drew Industries and Thor Industries have given investors roughly the same performance while Skyline Corporation has been a disappointment.

Finally, here is a look at the latest technical charts for all four RV stocks:

The Bottom Line. Small cap Winnebago Industries looks like its in solid shape but investors may also want to take a closer look at Drew Industries and Thor Industries given their similar performance to WGO.