The Company in a Nutshell
- BRP is literally surfing on strong tailwinds and already exhibits an impressive dividend triangle.
- For years to come, the company should grow organically through various markets.
- BRP enjoys a strong brand name, and its products are distributed across the world.
Date Reviewed | 4/17/2024 |
Company Name | BRP Inc |
Symbol | DOO.TO |
Sector | Consumer Discretionary |
Industry | Recreational Vehicles |
Beta | 2.299488979 |
PRO Rating | 4 |
Dividend Safety | 4 |
Business Model
BRP Inc. is a Canada-based company that specializes in powersports products, propulsion systems and boats. Its segments include Powersports and Marine. Powersports segment comprises Year-Round Products (all-terrain vehicles, side-by-side vehicles and three-wheeled vehicles), Seasonal Products (snowmobiles, personal watercraft and pontoons) and Powersports PA&A and OEM Engines (parts, accessories and apparel (PA&A), engines for karts and recreational aircraft, Pinion gearboxes and other services). Marine segment consists of boats, pontoons, jet boat and outboard engines and related PA&A and other services. Its brands include Ski-Doo and Lynx snowmobiles, Sea-Doo watercraft and pontoons, Can-Am on and off-road vehicles, Alumacraft and Quintrex boats, Manitou pontoons and Rotax marine propulsion systems and Rotax engines for karts and recreational aircraft. It is developing electric models for its existing product lines and exploring new low voltage and human assisted product categories.
Current price | 83.48 |
ROE | 110.65 % |
ROIC | 27.55 % |
Shareholder Yield | 0.65 % |
5-Yr Total Return | 66.70 % |
1-Yr Total Return | -17.80 % |
Next Earnings Date | 11-28-24 |
Latest Quarter Information
What the CEO said:
âOur first quarter results were in line with expectations and reflect our focus on managing network inventory to protect our dealer value proposition. Our strong product portfolio performed well at retail, especially in the Year-Round Products category, where we gained market share across all product linesâŚAs the year unfolds, our dealersâ profitability is under more pressure than anticipated given the current macroeconomic context, a more competitive landscape and high interest rates. For these reasons, we have decided to adjust our production to further reduce network inventory while continuing to maximize retail sales."
What we say:06-11-2024. As expected, in Q1â25 BRP volume of shipments declined YoY as BRP focuses on reducing network inventory levels throughout Fiscal 2025. Adjusted EPS was $0.95, down from $2.38 in Q1â24. North American retail sales for Powersport Products were down 5% due to seasonal products given lower industry volumes, in part offset by an increase in year round products due to market share gains in SSV and ATV. Lower volume and higher sales incentives due to increased promotional intensity led to lower gross margin, down 210 bps to 23.6% vs Q1â24. Operating expenses grew by 4.2% to $356M due to higher R&D expenses to support future growth, and restructuring and reorganization costs.
Investment Thesis
BRP has been around for several years but could now be on your radar as a dividend investor. This low yield, high growth stock began paying dividends in 2018. Since then, the dividend triangle is pointing in only one direction: up! The company has optimized its manufacturing plants, which has led to healthier margins. BRP must continue to innovate with new products (notably electric vehicles) to keep its edge against the competition. BRP enjoys a strong brand name, and its products are distributed across the world. There is a growing demand for BRPâs products, and this demand saw an increase during the pandemic. BRP posted record breaking revenues in Q2 2023, with a YoY increase of 14%, and NA sales growth of 41%. Unfortunately, Q4 2023 showed a darker story.
Dividend Triangle
5-Yr Rev. Growth | 14.60 % |
5-Yr EPS Growth | 32.95 % |
5-Yr Div Growth | 14.85 % |
Potential Risks
While BRP is a strong player in its markets, it also faces fierce competition from Polaris (PII) and Honda. This means marketing and R&D spending wonât slow down anytime soon. There is always a risk in heavily investing in products that follow a cyclical demand. BRPâs sales volume also depends on the good standing of the economy, the appetite of consumers to spend extra money and, most importantly, the credit standing of most of their consumers. We saw a slowdown in the dividend triangle in 2021, but the companyâs last few quarterly earnings brought growth back to the table (excluding Q4 2023). Those âtoysâ cost several thousand dollars and are often offered with a financing plan. If the appetite to finance such goods diminishes (considering interest rates and an economic slowdown), sales will automatically drop.Â
Debt/Equity | 3.65 |
Financial Debt to EBITDA (TTM) | 2.40 |
Current Ratio (Quarterly) | 1.40 |
Credit Score | 9 |
Dividend Growth Perspective
BRPâs dividend wonât pay your utility bills anytime soon. BRP recently began paying a dividend and has increased it at double-digit levels since. Donât expect BRP to become a solid income generator in your portfolio anytime soon as the company is clearly more interested in investing in its organic growth along with a few small acquisitions. We believe this is the right course of action for this company considering it can add a lot more value for shareholders this way. The 2024 dividend increase was an impressive 17%, from $0.18 to $0.21.Â
Dividend ($) | 0.84 |
Dividend Yield Fwd | 1.00 % |
Dividend Frequency | Quarterly |
Average 5-Yr Yield | 0.60 % |
Payout Ratio (%) | 7.50 |
Cash Payout Ratio (%) | 9.50 |
DGR 1-Yr | 16.65 |
DGR 3-Yr | 87.05 |
DGR 5-Yr | 14.85 |
DGR Streak | |
Chowder Score | 15.85 |
Next DVD PMT | 10-11-24 |
Valuation
Recent Annual Dividend Payment | $ 0.72 |
Expected Dividend Growth Rate Years 1-10 | 12.00% |
Expected Terminal Dividend Growth Rate | 5.00% |
Discount Rate | 10.00% |
Discount Rate (Horizontal) | |||
Margin of Safety | 9.00% | 10.00% | 11.00% |
20% Premium | $ 39.82 | $ 31.28 | $ 25.62 |
10% Premium | $ 36.50 | $ 28.67 | $ 23.48 |
Intrinsic Value | $ 33.18 | $ 26.07 | $ 21.35 |
10% Discount | $ 29.86 | $ 23.46 | $ 19.21 |
20% Discount | $ 26.54 | $ 20.85 | $ 17.08 |
Market Cap | 3 B |
PE Ratio | 26.60 |
Fwd PE | 18.70 |
Price to Book Ratio | 11.15 |
DDM Valuation | 26.07 |
Average 5-Yr PE | 16.96 |
Value Score | 67 |
- All financial metrics are updated weekly.
- The DSR PRO rating and Dividend Safety Score are updated quarterly.
- The analysis (investment thesis, risk potential, dividend growth perspective and DDM calculation) is reviewed every 6 months.
- The PDF format includes only comments (no metrics) and is reviewed every 6 months.