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Bull of the Day: Malibu Boats (MBUU)

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Malibu Boats (MBUU - Free Report) has been on a tear lately, aided by a recent earnings beat and a strong tailwind in the recreational sports industry. 

A strong U.S. economy, record low unemployment, rising wages and recent tax cuts have put Americans in a position to spend discretionary income on luxury items like boats, and spending they are, sending Malibu revenues through the roof and propelling the stock to a new 52-week high.

Malibu Boats manufactures and sells three line of boats, Malibu, Axis Wake Research and the recently acquired high performance brand Cobalt. It has the #1 position in market share for performance sport boats and it’s watercraft are widely used on lakes and rivers across the country for water skiing, wakeboarding, fishing and general recreation.

Surprise Earnings Beat

Reporting on May 2nd, Malibu reported Sales of $140M, a full 86% higher than the same quarter in 2017.  Earnings came in at $0.89/share, beating the Zacks Consensus Estimate of $0.71/share.

CEO Jack Springer backed up the solid numbers with positive comments, saying, “This performance continues to be driven by robust retail demand in the United States along with Malibu’s operating efficiencies…We are executing very well, and as we march toward the end of the fiscal year, macro indicators suggest that the market for our products will stay strong.”

Shares of Malibu rose 20% in a single day on the news.

More Upside Potential?

With the recent run-up in Malibu shares, investors would be wise to ask whether the effect of the strong results is already reflected in the stock price, but the company appears poised to continue rewarding investors with continued strong performance into the foreseeable future.

Trading at a forward P/E ratio of 18.4X, Malibu is still attractively valued relative to its peers who average 24.1.  At 2.0X, its price to sales ratio is also considerably lower than the industry average of 4.0X.  More attractive valuation metrics than its competitors are an indication that the recent rally can be sustained.

After 5 analyst upgrades in the past 7 days, the Zacks Consensus Earnings Estimate for 2018 now stands at $2.40/share, more than 50% higher than 2017 and earning Malibu Boats a Zacks Rank #1 (Strong Buy).

With more Americans than ever in a position to participate in leisure activities as we head into the summer months, Malibu Boats is in a great position to capitalize on the boom.

 

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