Stock Analysis: MarineMax
MarineMax (ticker: HZO) is the world’s largest recreational boat and yacht retailer, selling new and used recreational boats, marine-related services and providing yacht brokerage and charter services.
MarineMax has over 100 locations worldwide, including 79 retail dealership locations including 31 marinas or storage operations.
Through Fraser Yachts and Northrop and Johnson, the Company also is the largest super-yacht services provider, operating locations across the globe.
Cruisers Yachts, a MarineMax company, manufactures boats and yachts and sells through select retail dealership locations and independent dealers. Intrepid Powerboats, a MarineMax company, manufactures powerboats and sells through a direct-to-consumer model.
MarineMax provides finance and insurance services through wholly-owned subsidiaries and operates Boatyard, a pioneering digital platform that enhances the boating experience.
MarineMax commenced operations on March 1, 1998, acquiring five previously independent recreational boat dealers.
Economy of scale: Sector leadership. Since 1998, Marine Max has acquired 32 independent recreational boat dealers, multiple marinas, four boat brokerage operations, two superyacht service companies, two full-service yacht repair operations, and two boat and yacht manufacturers. Marine Max's acquisition strategy and scale provide a significant competitive advantage. It has a global business reach with a valuable real estate portfolio.
Product Quality: Marine max provides exceptional service and customer experience. It offers a complete buying experience. It covers every aspect of the boat and yacht lifestyle.
Demand: The yacht industry has largely shrugged off the pandemic with record growth in orders. The 2022 Global Order shows an impressive 24.7% rise in build or on order projects. Marine Max has a significant opportunity to grow its market penetration.
Robust sales channels: Direct to client strategy and global network of marinas. Marine Max also provides high margin services for yacht owners.
Revenue Growth: Revenue has been growing consistently with increasing margins.
Quality of Earnings: Solid growth in profits. Both net income and free cash flow show overall trending up. The FCF/Net Income ratio is good.
Return on Invested Capital: High ROIC shows a company capable of efficiently reinvesting its money.
Solid balance sheet: 22 million in cash and manageable long-term debt.
Buying back shares: Company has been maintaining consistent numbers of outstanding shares and repurchasing them.
Macro: Significant risk to the downside in the current macro scenario. The inflationary environment can significantly damage the yacht sector because of the cost of business and interest rates. Moreover, revenues and profitability could be significantly impacted in a recession.
When considering an investment, one must compare it to alternatives to weigh up the opportunity cost. At present, 10-year treasuries are yielding around 3.05%.
The projected annual yield for HZO could be 15.5%. The yield is based upon a free cash flow yearly growth estimate of 5%. The intrinsic value price sits at around $64, indicating that HZO could be currently undervalued.
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Disclaimer: The author might or might not hold ownership in the company mentioned when writing this article. I do not provide personal investment advice, and I am not a qualified licensed investment advisor. I am an amateur, independent investor. All the information is for entertainment or educational purposes only and should not be construed as personal investment advice. While the information provided is believed to be accurate, it may include errors or inaccuracies.