Pros:
-PE of 17, forecasted earnings growth of 14-15%
– Very high ROIC, consistently around 20-30% since 2015
– Long runway for international growth, doubled their international sales last year, making up 10% of gross sales now
– Solid balance sheet, $312 million in cash with little debt
– Growing Net margin, as DTC channel has doubled as percent of sales since 2018. From 30% in 2018 to 57% as of 2021
– Could argue for a MOAT, known for high quality products (entire subreddit dedicated for the love of their product lol)
– On the verge of diversifying revenue streams, 39% of sales include coolers and equipment, 59% of sales are drinkware, and expanding into other products
Cons:
- gross margin hit by higher freight costs as of late, a big reason why the stock has fallen from highs but likely to be higher long term
- High competition in the industry, including big names such as Hydroflask, Coleman, etc.
- Yeti products are known for quality products, but at higher prices, competition could take advantage of this
- Although small, employee stock purchase plans have increased shares by a couple percent per year
- Failure to create new products that are successful could lead to stagnation, as Yeti products don’t need to be replaced often
- You could argue Yeti products saw massive growth due to pent up covid demand, although growth forecast is still high for the company
Using their net income last year of $213 million, a conservative earnings growth rate of 10%, a discount rate of 10%, and a last FCF multiple of 16, i come up with an intrinsic value of around $65 a share, giving it about a 35% margin of safety to today’s stock price. If my estimates are more in line with analyst expectations of 15%, the intrinsic value comes out to $93.
Any thoughts on this company? Although a questionable MOAT, it seems consumers are satisfied with Yeti products. I’d love to see some opinions.
Leave a Reply