Below is an excerpt of a story from investment site SeekingAlpha.com analyzing Thor Industries Inc. The full story is available here.
- Thor Industries is a potential value and dividend growth opportunity with a low PEG ratio, no debt on the balance sheet, and a history of returning capital to shareholders.
- A decentralized corporate structure and stances such as ‘no golden parachutes’ and ‘no ivory tower’ are a refreshing alternative to the norm.
- Recent earnings disappointment has lowered the entry point for long-term investors.
- Positive long-term trends and growth through acquisitions should lead to increased cash flow and earnings.
My goal as an income investor is to create a portfolio of investments that generate reliable and compounding cash flow to grow my net worth and fund my eventual retirement before I turn 56. I’ve deployed a strategy of multiple streams of income including real estate, peer lending and dividend growth stocks to reach my goal. My dividend stocks reside in a taxable brokerage account, various dividend reinvestment plans (DRIPs), and in a no-fee dollar cost average account.
In a recent blog post, I identified six debt-free dividend growth stocks that caught my attention, beyond just being debt-free. One of those stocks, Thor Industries (NYSE:THO) seemed to be a compelling investment prospect. Since the article, I’ve had the stock on my watch list.
Thor operates under a decentralized business model, meaning each operating entity does business independently under the Thor Industries umbrella. This structure allows each entity to remain entrepreneurial and stay close to its customers and dealers. The company has grown its RV portfolio over the years through numerous acquisitions.
The 12 operating subsidiaries include Airstream, Bison Coach, Crossroads RV, Cruiser RV, DRV Luxury Suites, Dutchman, Heartland RV, KZ, Keystone RV Company, Livin Lite RVs, Thor Motor Coach, and Postle Aluminum. They offer RVs under dozens of brand names.
The latest acquisition announced in May, Postle Aluminum, is a long-time material supplier to the RV industry. 75% of their sales were to the RV industry, including 30% of sales to Thor Industries and its subsidies. Thor Industries has used cash on hand to make acquisitions, increasing its future cash flows without bloating shares outstanding or adding debt.
The company presents itself as a conservatively run, no-nonsense operator in its investor literature. Reading through the most recent investor presentation, I was entertained by the straight-talking tone. Some of the gems in the presentation include:
- Our focus requires that we make decisions based on the long-term success of our company.
- Growth is important, but this is a business of relationships, and we realize that the key to long term sustainable sales growth rests in the strength of our relationships with consumers, dealers and suppliers.
- No ivory tower: approximately 9,400 employees, only 42 in corporate staff.
- No golden parachutes.
- No ‘pro forma’ earnings. We report net income, not adjusted earnings to cover up performance.
- Decision making driven by the needs of the customer.
- Profitable every year since our founding in 1980; 34 years of profitability.
I don’t own an RV or aspire to own one in retirement. The thought of buying stock in this company was far from my mind when I first started researching Thor Industries. However, the debt-free balance sheet and impressive fundamentals made this stock hard to ignore.