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Bull of the Day:Camping World Holdings (CWH)

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David Borun
·4 min read
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Summer is nearly upon us; successful vaccination efforts have prompted a wave of business reopenings and it’s RV season.

One of the most remarkable success stories of the past year has been a meteoric rise in the popularity of recreational vehicles. Though you’d certainly be forgiven for not anticipating it in the Spring of 2020 when Americans were suddenly dealing with strict stay-at-home restrictions, the pandemic ushered in a new golden age for traveling the nation’s highways.

As airlines, hotels and cruise ships saw steep drop offs in bookings and revenues, consumers didn’t lose their desire to travel, they simply readjusted their sights to include new methods of getting around. Owning an RV checked a lot of boxes. For many, it took the place of both air travel and hotel stays, combining the “getting there” along with the “where to stay” in a single safe environment.

Owning the means of transportation and the lodging meant travelers were in control of their environment and could isolate themselves from virus exposure while still getting (far) out of their homes. RVs provided a valuable sense of self-sufficiency during a tumultuous time.

Camping World Holdings (CWH) has been in existence since 1966, but what started as a single mom-and-pop dealership has rapidly grown into the nation’s largest network of RV sales and service centers over the past few years.

CEO Marcus Lemonis – who you’ve probably seen on several CNBC television shows – is a master of consolidation. He’s not reinventing the wheel, he’s simply buying up a huge number of the small, local operations and putting them under the huge CWH umbrella, taking advantage of large (and growing) economies of scale.

What has been created is an “ecosystem” of not just RV sales, but also service and support and accessory items. Think about how Apple (AAPL) doesn’t just sell hardware. They sell you a phone, tablet or computer that makes you want other stuff like music, video, books, or another piece of hardware like ear buds or a watch that seamlessly melds with your original device.

It’s much the same soy at Camping World. Customers don’t just buy an RV, they also subsequently need service, repairs and extra accessories to make their RV time more enjoyable. Once they’re in the ecosystem, there’s virtually no end to how much more money they can spend on their new hobby if they choose.

Camping World also deals in pre-owned vehicles, so when a customer decides to trade or sell their vehicle, there’s a good chance CWH can get involved in that transaction as well.

After a tough stretch in 2018-2019, CWH shares have dramatically outperformed the broad markets since the beginning of 2020.

While that type of share appreciation can sometimes be a red flag for investors who fear “buying the top” at a stretched earnings valuation, it’s not the case for Camping World because earnings and earnings forecasts have been keeping pace with the stock price.

In fact, with a full-year 2021 Zacks Consensus Earnings Estimate that has risen from $2.87/share all the way to $3.89/share recently, Camping World currently trades at a Forward P/E Ratio of just 9X – less than half the multiple of the S&P 500.

Those rising estimates also help earn CWH a Zacks Rank #1 (Strong Buy).

RV deliveries are expected to expand 24% in 2021 over the (already huge) 430K that were sold in 2020. To take advantage of those trends, investors would be wise to consider the industry leader in sales and service – a company that’s positioned to reap the benefits of consumer spending on service, repairs and accessories that’s likely to occur years into the future.

That leader is Camping World Holdings.

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