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5 Stocks to Buy From Promising Leisure & Recreation Products Space

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The Zacks Leisure and Recreation Products industry is benefiting from robust demand for recreational products and golf business. The companies, which design, market, retail, and distribute products for the outdoor and recreation market are witnessing robust demand. Moreover, golf manufactures and boating suppliers are gaining from the ongoing coronavirus pandemic. Further, rise in fitness products sales due to increase in awareness about health and fitness among people is favoring the industry.

Stocks including Acushnet Holdings Corp. (GOLF - Free Report) , Callaway Golf Company (ELY - Free Report) , Malibu Boats, Inc. (MBUU - Free Report) , OneWater Marine Inc. (ONEW - Free Report) and Vista Outdoor Inc. (VSTO - Free Report) are likely to gain from the abovementioned industry trends.

Industry Description

The Zacks Leisure and Recreation Products industry comprises companies that provide amusement and recreational products, including swimming pools, golf courses, boats and outdoor spaces. Some of the industry participants also manufacture outdoor equipment and apparels for climbing, mountaineering, backpacking and skiing.

The industry players primarily thrive on overall economic growth, which fuels consumer demand for products. In fact, demand, which is highly dependent on business cycles, is driven by a healthy labor market, rising wages and growing disposable income.

3 Trends Shaping the Future of Leisure and Recreation Products Industry

Boating Suppliers Witnessing Robust Demand: New boat sales have increased sharply amid the coronavirus pandemic. In fact, boat sales have been going through the roof since April-end last year and some dealers are hard pressed to supply. Matt Gruhn, president of the Marine Retailers Association of America (MRAA), is of the opinion that people have had time to research boats while they’ve been cooped up at home. Per National Marine Manufacturers Association (NMMA) reports, retail unit sales of new powerboats increased by 12% in 2020, compared with the prior year. More than 310,000 new powerboats were sold in 2020. Moreover, boat sales in the United States touched a 13-year high. The momentum is likely to continue into 2021 as manufacturers continue to fulfill a backlog of orders from 2020.

Booming Golf Business: The golf industry has been doing exceptionally well during the pandemic. Golf is benefiting from increase in participation of young people who were compelled to refrain from sports like football in adherence to social distancing protocols. Per Golf Datatech and its 2020 National Golf Performance Report, 2020 rounds rose by 13.9%, while equipment sales surged 10.1% in 2020. The 10.1% increase in retail sales broke the previous record gain of 10% in 2005. During the second half of 2020, demand for all gulf things increased. The uptrend is likely to sustain in 2021.

Liquidity a Major Factor During Pandemic: Maintaining liquidity has become a herculean task for a number of industry participants in the current scenario. Most of the companies are cutting pay and furloughing employees. The industry participants are also suspending share repurchase programs and dividend payouts in an effort to improve liquidity.

Zacks Industry Rank Indicates Bright Prospects

The Zacks Leisure and Recreation Products industry is grouped within the broader Consumer Discretionary sector.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects.

The Leisure and Recreation Products industry currently carries a Zacks Industry Rank #16, which places it in the top 6% of more than 253 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The industry’s position in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. Since Sep 30, 2020, the industry’s earnings estimate for the current year has increased 24.3%.

Before we present a few stocks from the industry that you may want to consider, let’s take a look at the industry’s recent stock market performance and valuation picture.

Industry Outperforms on Shareholder Returns

The Zacks Leisure and Recreation Products industry has outperformed the Zacks S&P 500 composite and its sector over the past year. Stocks in this industry have collectively gained 110.4% over the past year compared with the S&P 500 rally of 16.3%. Notably, the Zacks Consumer Discretionary sector has increased 15.1% in the same time frame.


                                  One Year Price Performance



Valuation

On the basis of forward 12-month price-to-earnings, which is a commonly used multiple for valuing leisure products stocks, the industry trades at 36.21X compared with the S&P 500’s 22.46X and the sector’s 32.77X. Over the past five years, the industry has traded as high as 46.8X and as low as 12.9X, with the median being at 15.5X, as the charts show.

            Forward Price To Earnings Ratio Compared With S&P





5 Leisure & Recreation Products Stocks to Keep an Eye on

Acushnet Holdings: This Fairhaven, MA-based company designs, develops, manufactures, and distributes golf products in the United States, Europe, the Middle East, Africa, Japan, Korea, and internationally. The Zacks Rank #2 (Buy) is likely to benefit from increase in demand for golf balls. The company is gaining from healthy order backlog, strong at-once demand, lean channel inventories and gradually increasing output levels. Robust demand for its Pro V1 franchise is also favoring the company. The Zacks Consensus Estimate for 2021 has been revised upward by 7.3% in the past 30 days. The stock has gained 20% in the past three months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

                                            Price & Consensus: GOLF



Callaway Golf: This Carlsbad, CA-based company designs, manufactures, and sells golf clubs and golf balls, apparel, gear, and other products. This Zacks Rank #1 company is benefiting from strong demand for the company’s golf equipment. Moreover, the company’s TravisMathew and Callaway branded businesses is witnessing robust growth. The Zacks Consensus Estimate for current quarter earnings has been revised upward by 6.9% in the past 30 days. The stock has appreciated 76.7% in the past three months.

                                            Price & Consensus: ELY


Malibu Boats: This Loudon, TN-based company operates as a designer, manufacturer and marketer of sport boats primarily in the United States. Strength at retail, robust cash flow generation and strong future demand is likely to benefit the company in fiscal 2021. Its strategic initiatives, operating plan, and robust product portfolio also bode well. The Zacks Consensus Estimate for fiscal 2021 earnings have been revised upward by 5.9% in the past 30 days. The stock has gained 40.4% in the past three months. It carries a Zacks Rank #2.

                                        Price & Consensus: MBUU


OneWater Marine: This Buford, GA-based company is a recreational boat retailer in the United States. Other than the sale of new and pre-owned recreational boats and yachts, it sells related parts and accessories, arranges boat financing and insurance; provides boat repair and maintenance services, and other ancillary services such as indoor and outdoor storage. It also rents boats and personal watercraft. This Zacks Rank #1 company is benefiting from robust manufacturing partnerships, well-organized sales process and innovative retail technologies. The Zacks Consensus Estimate for current quarter earnings has been revised upward by 6.4% in the past 30 days. The stock has soared 73.5% in the past three months.

                                     Price & Consensus: ONEW


Vista Outdoor: This Anoka, MN-based company designs, manufactures, and markets several consumer products in the outdoor sports and recreation markets in the United States and internationally. This Zacks Rank #2 company’s is gaining from solid business model, products offering and expansion of its e-commerce capabilities.  The Zacks Consensus Estimate for 2020 earnings has been revised upward by 0.7% in the past 30 days. The stock has gained 43.5% in the past three months.

                                Price & Consensus: VSTO

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