One stock, in particular, has experienced a significant amount of volatility of late, and has surprised many investors (including myself) with considerably better results than may have been expected. The severity of the coronavirus pandemic and its impact on the broader economy has had less of an impact than expected on recreational vehicle maker BRP, Inc. (TSX:DOO).
Formerly Bombardier Recreational Products, BRP has been spun off for a few years now and has continued to impress investors and analysts over the past 10 years following the last financial crisis which put a real strain on the company’s business model at the time.
The coronavirus pandemic has thus far had what I would call a neutral impact on BRP’s top and bottom lines. Sales that may have been lost due to higher unemployment and household debt levels have been replaced with sales of recreational vehicles to consumers looking to safely socially distance on a water ski or snowmobile – an understandably fun and exciting way to do so.
That said, on a fundamental basis, BRP’s debt remains a concern for me, as does the company’s valuation, with little in the way of forward earnings risk being priced in presently.
With a debt-to-EBITDA ratio above 3 at the time of writing, and a relatively recession-prone business model, this is a stock I’d recommend investors keep on their watch lists for now.
Investors should consider this stock in the future when the company’s valuation and fundamentals are more aligned with a value investment, as this stock resembles a growth pick today.
Invest wisely, my friends.
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