Opinions John Zechner
BRP INC.DOO.TOPAST TOP PICKAug 13, 2024
Stock price when the opinion was issued
As of May 27, 2026. Market Open.
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Premium contentThe Quebec based manufacturer of outdoor recreation vehicles is a TOP PICK. We like how cash reserves are growing as the company aggressively buys back shares and reduces debt. It trades at 26x earnings and supports a 31% ROE. We recommend setting a stop-loss at $67, looking to achieve $93 -- upside potential of 20%. Yield 0.8%
(Analysts’ price target is $93.25)Premium contentOur PAST TOP PICK with DOO has triggered its stop at $80. To remain disciplined, we recommend covering the position at this time. This will result in a net investment gain of 9%, when combined with our previous recommendations.
DOO reported EPS of 61c, beating estimates of 44c but declining from prior quarterly levels of $3.21. Revenue came in at $1.84B missing estimates of $1.89B and declining 34% year-over-year. Lower revenues were attributed to lower volume across most product lines as it continued to reduce its network inventory levels. Operating margins also dropped 470 basis points as a result of the lower volumes. DOO also cut its FY2025 guidace significantly. Revenue of C$7.8B-C$8B is expected from C$8.6B-C$8.9B, and normalized EPS of C$2.75-C$3.25 is expected from C$6.00-C$7.00. The results were of course not good and highlight the softening industry demand and transitional period the company is entering, as described in our recent report.
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It is picking up market share in recreational products. It is cheap at 8X operating cash flow. The consumer may be slowing down
John ZechnerPremium content
Premium contentWith cash reserves growing, debt declining and shares being bought back, we select DOO as a TOP PICK. Seasonal sales in both water and power sports will begin to ramp up. It trades 8x earnings and supports a strong ROE. Its modest dividend is backed by a payout ratio under 10% of cash flow. We recommend setting a stop-loss at $67, looking to achieve $102 — upside potential of 22%. Yield 0.8%
(Analysts’ price target is $102.22)Trades at 8x PE vs. peers at 12x. They mostly beat their last quarter, generate free cash, take more market share and enjoy robust demand for snowmobiles. A caveat is that in a downturn, discretionary costs like this will be cut.
(Analysts’ price target is $138.93)John ZechnerIt held up well during the downturn and is therefore resilient. It has rallied and maintained at these higher levels. The consumer goods sector and leisure products are doing well.
David Burrows3-5 year hold? An innovative company that captivates its customers. On a 12-month trailing basis is earning 2x what its normalized earnings power is. They sell jet skis and other expensive toys that people bought during the pandemic, and you won't need to replace those anytime soon. It was a 6-bagger during Covid, but has since come off 28%. This will likely grind lower lower before it resumes its uptrend. Still not cheap and expectations are still too high. If you hold this for 3-5 years it's probably okay, but not for him.
We didn't have a winter last year. People bought ski-doos during the pandemic, but are travelling now. He still likes it. It's cheap and there's less competition now. He sold it, but will re-enter it.