Opinions
Rebecca Teltscher
BRP Inc.
DOO-T
DON'T BUY
Apr 02, 2025
Stock price when the opinion was issued
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With 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)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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Our 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.
The 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)
Underlying business is very discretionary. Underperformed this year and last. That's why she tries to stay away from discretionary names. Not a name to ever own. Can be so volatile. Consumers are strapped, Canadian economy is weak, US is weakening.
She likes to own names that are good through any market cycle. This is a name to possibly own in an up-market cycle, which we're clearly not in right now.