Outdoor and recreational activities took a big hit during the pandemic. Still, outdoor sports and recreation bounced back strongly and are expected to keep growing as people partake in their favorite activities, such as camping, fishing, surfing, skiing, climbing, skateboarding, etc.
Amid this backdrop, it could be wise to add fundamentally strong athletic stocks Marine Products Corporation (MPX), MasterCraft Boat Holdings, Inc. (MCFT), and American Outdoor Brands, Inc. (AOUT) to one’s watchlist.
Before diving deeper into the fundamentals of these stocks, let’s discuss why the athletic industry is well-positioned for growth.
When it comes to outdoor sports and recreational activities, the pandemic changed the way consumers behaved. After the restrictions on movement were lifted, Americans swarmed outdoors to participate in the recreational activity they liked.
This boosted the demand for the sporting goods retail industry, which includes sporting equipment, firearms and hunting equipment, power and fishing boats, athletic apparel, and footwear. As per IBISWorld, the market of the sporting goods retail industry (measured by revenue) will be $67.8 billion in 2023.
A joint report by the Outdoor Industry Association (OIA) and Outdoor Foundation (OF) showed that 55% of the U.S. population over the age of six takes part in outdoor activities.
This rising interest in recreational and outdoor activities is expected to boost the demand for sportswear, athletic footwear, sports and fitness equipment, powerboats, etc. Moreover, with solid job growth and robust consumer spending, the athletic industry is expected to witness strong demand for outdoor and recreational products and equipment.
The global recreational boat market is expected to grow at a CAGR of 6.5% to reach $25.9 billion by 2028. Sports and outdoor market revenue is projected to reach $22.88 billion in 2023. Additionally, revenue is expected to grow at a CAGR of 10.7% between 2023 and 2027 to reach $34.37 billion by 2027.
Let's take a closer look at their fundamentals.
Marine Products Corporation (MPX)
MPX designs, manufactures, and sells recreational fiberglass powerboats for the sportboat, and sport fishing boat markets worldwide. The company offers Chaparral sterndrive pleasure boats, Chaparral outboard pleasure boats, and Robalo outboard sport fishing boats.
In terms of the trailing-12-month EBITDA margin, MPX’s 13.64% is 25.4% higher than the 10.88% industry average. Likewise, its 13.01% trailing-12-month levered FCF margin is 252.9% higher than the 3.69% industry average. Furthermore, the stock’s 2.60x trailing-12-month asset turnover ratio is 158.9% higher than the 1x industry average.
MPX’s net sales for the first quarter ended March 31, 2023, increased 55.2% year-over-year to $118.91 million. Its gross profit for the period rose 57.8% year-over-year to $29.02 million. The company’s net income increased 63.5% year-over-year to $11.55 million.
Also, its EPS came in at $0.34, representing an increase of 61.9% year-over-year. In addition, its EBITDA increased 55.9% year-over-year to $15.01 million.
Over the past nine months, the stock has gained 108.5% to close the last trading session at $17.41.
MPX’s POWR Ratings reflect strong prospects. It has an overall rating of A, translating to a Strong Buy in our proprietary system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked first out of 37 stocks in the Athletics & Recreation industry. It has an A grade for Growth and a B for Sentiment and Quality. Click here to see MPX’s Value, Momentum, and Stability rating.
MasterCraft Boat Holdings, Inc. (MCFT)
MCFT designs, manufactures, and markets recreational powerboats. It operates through four segments: MasterCraft, Crest, NauticStar, and Aviara.
On June 28, 2023, MCFT announced the introduction of the XT25, a redesigned towboat offering industry-leading wakesurfing capabilities and increased ballast capacity. It includes MasterCraft's updated SurfStar system with foiling profiles and standard underwater exhaust for reduced fumes and noise.
In terms of the trailing-12-month EBITDA margin, MCFT’s 17.38% is 59.8% higher than the 10.88% industry average. Likewise, its 2.41x trailing-12-month asset turnover ratio is 139.9% higher than the 1x industry average. Additionally, the stock’s 15.52% trailing-12-month EBIT margin is 111.8% higher than the 7.33% industry average.
For the fiscal third quarter that ended April 2, 2023, MCFT’s net sales came in at $166.78 million. The company’s adjusted net income came in at $24.12 million. Its adjusted EPS was flat year-over-year at $1.36. In addition, its adjusted EBITDA came in at $32.99 million.
For fiscal 2023, MCFT’s EPS is expected to increase 11.4% year-over-year to $5.06. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 31.3% to close the last trading session at $27.90.
MCFT’s positive outlook is reflected in its POWR Ratings. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Value and a B for Growth and Quality. It is ranked #2 in the same industry. To see MCFT’s Momentum, Stability, and Sentiment ratings, click here.
American Outdoor Brands, Inc. (AOUT)
AOUT provides outdoor products and accessories for rugged outdoor enthusiasts. It offers hunting, fishing, camping, shooting, and personal security and defense products. The company also provides shooting sports accessories, including rests, vaults, and other related accessories, outdoor lifestyle products; land management tools; harvesting products; outdoor cooking products.
On July 11, 2023, AOUT announced that BUBBA, its fishing brand, will partner with Major League Fishing (MLF), featuring BUBBA Pro Series Smart Fish Scale as MLF's official scale for the 2024 Bass Pro Tour season. The BUBBA Pro SFS offers accuracy, reliability, and ease of use, empowering pros and aspiring anglers alike.
AOUT’s CEO Brian Murphy said, "We are thrilled to be named the official scale of Major League Fishing. BUBBA has always been committed to providing anglers with the absolute best tools, and our smart scale is no exception. We are proud to support MLF's ambitious vision for the future of bass fishing."
In terms of the trailing-12-month gross profit margin, AOUT’s 46.06% is 30.9% higher than the 35.19% industry average. Likewise, its 15.08% trailing-12-month levered FCF margin is 309% higher than the 3.69% industry average.
AOUT’s net sales for the fourth quarter ended April 30, 2023, came in at $42.20 million. Its non-GAAP gross profit came in at $19.07 million. The company’s non-GAAP operating income came in at $800 thousand, while its non-GAAP net income came in at $793 thousand.
Its adjusted net income per share came in at $0.06. Additionally, its adjusted EBITDA came in at $1.80 million.
Analysts expect AOUT’s EPS and revenue for the quarter ending January 31, 2024, to increase 48.7% and 7.5% year-over-year to $0.19 and $54.72 million, respectively. Over the past month, the stock has gained 16.4% to close the last trading session at $9.02.
AOUT’s POWR Ratings reflect solid prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Value and a B for Growth, Sentiment, and Quality. Within the Athletics & Recreation industry, it is ranked #3. Click here to see AOUT’s rating for Momentum and Stability.
What To Do Next?
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MPX shares were trading at $17.20 per share on Wednesday afternoon, down $0.21 (-1.21%). Year-to-date, MPX has gained 49.06%, versus a 19.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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