When you reverse and load the truck camping world (CWH -1.66%) Stocking up earlier this year might make you feel like a lucky camper. The recreational vehicle retailer’s stock is up about 60% year-to-date, compared to about 25% for the Standard & Poor’s 500 Index. Several trends driving this growth could give Camping World enough gas to keep going.
Not just an RV dealer
Camping World, based in Lincolnshire, Illinois, reported a 14.2% increase in revenue and a 22.3% increase in net income for the third quarter ended September 30. Expect a pandemic surge. Americans, no longer tied to offices, decided to take to the streets and turned to RVs. Demographics also played a role, as more baby boomers were retiring and more millennials were exploring the van life.
It is difficult to find a comparable company to Camping World. Lazydays Stocks (LAZY 2.15%) is very similar with a chain of retailers and a range of product offerings for outdoor enthusiasts. The stock is up more than 29% year-to-date. In a highly fragmented industry, Camping World is much larger, with a market cap of more than $3.5 billion compared to Lazydays’ $230 million.
Camping World also has a much broader strategy as it has built a universe of interlocking businesses that form a whole community among RV enthusiasts. In addition to dealers across the country, Camping World owns the legendary Good Sam Club, which dates back to 1966 and has more than 2.1 million members around the world. The company uses the connections through the club not only to sell new and used RVs and related outdoor gear, but also to offer property and casualty insurance programs, as well as vehicle financing, protection plans and roadside assistance. The company also operates a peer-to-peer RV rental platform and launches Electric World to sell electric trucks and ATVs.
Camping World reported record cash flow for its third quarter. and CEO Marcus Lemonis raised full-year 2021 cash flow guidance. The company’s improving cash position suggests that the trends driving the company’s growth have not abated significantly.
Lemonis is Camping World’s largest single investor, with nearly 53% of the company’s voting power following his recent proxy statement, and he’s increased those holdings over time , which is always a good sign. Those purchases suggest that Lemonis, which has successfully built the company since 2006, expects the good times to continue.
bumps in the road
Camping World has some unlucky campers. It’s been hit with a string of bad reviews, media campaigns, and even lawsuits from unhappy customers, disgruntled employees, and disillusioned shareholders. Some customers have complained of faulty vehicles, shoddy service, delays in completing repairs, and the company’s failure to honor warranties. Some employees have complained about chaotic and even toxic work environments, as well as layoffs. Over the past year, the company settled lawsuits from shareholders alleging that Camping World disclosed false information about its financial performance.
The company is not accredited by the Better Business Bureau and has a lot of “one star” reviews on its website, as well as negative reviews on many other websites. The outcome of bad publicity and pending lawsuits is unpredictable. The company has warned in a regulatory filing, “Adverse publicity arising from litigation, whether or not it results in significant costs, could cause material damage to our reputation and have a material adverse effect on our business, financial condition, results of operations and the price of our common stock.” of class A.”
A company as large as Camping World, which deals in the sale of used vehicles, inevitably has to face lawsuits, complaints and bad reviews. So far, these issues haven’t hampered the company’s growth, but could do so in the future if they continue. Camping World arguably needs to do more to defend its reputation, which would include keeping its key stakeholders happy.
Camping World’s size gives it a competitive advantage in a highly fragmented industry with more than 180 locations in 46 states. But it does not enjoy an insurmountable economic divide. There are more than 2,600 RV dealerships in the United States. Larger retailers may have greater reach, but smaller competitors may be able to offer better service and a more specialized product line. And with so many smaller retailers, the industry is ripe for mergers that could create larger competitors.
Additionally, a sharp rise in interest rates, an economic slowdown, persistently high fuel prices, or a mass return to the office could dampen the favorable trends that have kept the company on a sustained upswing.
Should you buy Camping World?
With its stock price soaring, the market currently doesn’t seem concerned about Camping World’s numerous consumer complaints or the risks to the economic and demographic trends driving its growth. If revenue were to fall, the market would likely take notice of these issues, but the business is growing and the stock price is rising.
Flaws aside, Camping World has built a solid and sustainable business model and demonstrated its ability for long-term growth. The stock is up more than 125% over the past five years. Sales have almost doubled in the last five years. The stock market as a whole is expensive and keeps making new highs. Camping World has also been a beneficiary of this trend, but its stock is trading at around $42, well below its 52-week high of $49.20.
For now, investors might want to watch for a further decline in the rising share price, but the company is well-positioned for long-term growth and represents a solid bet going forward.