OneWater Marine Stock: solid results; FY22 guidance up (NASDAQ:ONEW)
Solid overall results in 1Q22; Raised guidance
OneWater Marine (ONEW) announced 1Q22 results with excellent performance across all metrics. Management also raised its full-year guidance to include recently announced acquisitions and now expects adjusted EBITDA of $210-220 million and EPS of $8.00-8.40. Previous guidance called for adjusted EBITDA of $170 million to $175 million and EPS of $7.20 to $7.50.
The company’s revenue increased 57.1% year-on-year, driven by a 28% increase in same-store sales despite continued supply chain challenges. Same-store sales grew strongly despite tough competition. Acquisitions also helped drive sales growth in the quarter. The company continues to see strong demand for boats. Gross profit margin increased by 550 basis points year-on-year thanks to a favorable product mix. Adjusted EBITDA increased 146% year-on-year and net profit jumped 99% year-on-year. EPS for the quarter was $1.45, compared to $0.71 in 1Q22. 1Q22 EPS includes negative impact of $0.45/share due to transaction costs and contingent consideration [$0.03/share in 1Q21]. Over the past few months, OneWater Marine has pursued its acquisition strategy. Recently they acquired Quality Boats and JIF Marine.
On their conference call, management said they saw momentum in consumer demand continue through 1Q22 and there were no signs of it slowing down. In 2022, management expects high single-digit same-store sales despite ongoing inventory issues. The M&A pipeline for OneWater remains strong and they will seek to close 4-6 dealership deals and 2-4 parts and services transactions per year.
Valuations and target price
On our pro forma EPS estimate for FY 2009/22 of $8.10, OneWater Marine is trading at a very attractive P/E of 6.2x. With the continued strong series of financial and earnings accretive trades, our price target stands at $81, representing a 10x P/E on FY 2009/22 EPS. This implies an upside potential of 62%.
OneWater Marine is a boat retailer that has experienced significant growth over the past four years, which has only accelerated over the past year. The 4-year CAGR of revenue and adjusted EBITDA for the company were 33.0% and 72.4% respectively. While boat demand is generally driven by the economy, OneWater Marine’s focus on aftermarket services and financing has allowed it to diversify and stabilize its revenue streams and improve its margins. The recent acquisition of TH Marine will further strengthen this strategy. On our FY09/22 pro forma EPS, the current share price implies a P/E of 6.2x, which we believe is very low given the company’s track record of profitable growth. In our view, cheap valuations make the OneWater stock price very attractive. Risks to the investment thesis include – an economic downturn, declining margins, sustained inventory issues and low free cash flow.