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Patrick's (PATK) Shares Surge 48% Over a Year: Here's Why

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Patrick Industries, Inc.’s (PATK - Free Report) shares have gained 54.8% in the past year, outperforming the Zacks Building Products - Mobile Homes and RV Builders industry and S&P 500’s 30.9% and 43.8% rally, respectively.

This leading manufacturer and distributer of components and building products to RV, marine, manufactured housing as well as industrial markets has been riding high on improving housing market prospects, accretive acquisitions along with solid geographic-expansion efforts. The outperformance can also be attributed to its impressive surprise history, having surpassed the Zacks Consensus Estimates in the trailing six quarters.

Here are a few factors that are driving growth of this Zacks Rank #2 (Buy) company, which shares space with Masco Corporation (MAS - Free Report) , TopBuild Corp. (BLD - Free Report) and Advanced Drainage Systems, Inc. (WMS - Free Report) in the same industry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Strengthening Housing Industry

The U.S. housing industry has been resilient over the past few months. The recent market data — indicating prospects for the near term — are encouraging, given lower mortgage rates and reduced coronavirus-induced restrictions. Housing demand also remained strong, buoyed by the Fed’s dovish stance, low borrowing costs and lack of available supply, despite rising lumber prices. Through the first four months of 2021, construction activity increased 5.8% from the same period in 2020.

In addition to housing resilience, the COVID-19 pandemic led to greater interest among recreational vehicle (“RV”) consumers. The pandemic-imposed travel restrictions prompted many first-time buyers to opt for RVs. Notably, industry experts project 2021 to be the best year for RV shipments.

Expansion Through Acquisitions

Since 2010, Patrick has acquired more than 75 companies in core markets. Particularly in first-quarter 2021, it added Sea-Dog Corporation & Sea-Lect Plastics. Sea-Dog is a distributor of a variety of marine and powersports hardware and accessories to distributors, wholesalers, retailer as well as manufacturers. Also, it provides plastic injection molding, design, product development, and expert tooling to companies as well as government entities. The acquisition is an excellent fit for its existing products and will continue providing long-term strategic value, bringing high-quality innovative product lines to its portfolio. Notably, the buyout was added to the Distribution & Manufacturing segment.

Post first quarter-end, the company acquired Hyperform Inc., which operates under the SeaDek brand name in the marine OEM market and aftermarket.

Solid Returns, Cheaper Than Industry

Patrick is a great pick for investors as it is cheaper than the industry. The trailing 12-month price-to-earnings multiple for the company is 15.77, cheaper than the industry’s 18.25.

Also, Patrick’s return on equity (ROE) is indicative of growth potential. Its ROE of 21.7% compares favorably with the industry average of 16.5%, implying that it is efficient in using shareholders’ funds.

Estimates Look Strong

Earnings estimates for the second quarter and 2021 have risen 27.1% and 22.5%, respectively, over the past two months, reflecting growing optimism of analysts on the company’s bottom-line prospects. Also, this indicates year-over-year growth of 5,833.3% and 78.6%, respectively.

A solid VGM Score of A is another reason for investors to believe in its fundamentals, supported by a Value Score of A and Growth Score of B.

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