FOXF Stock Study (1-31-23)

I recently* did a stock study on Fox Factory Holding Corp. (FOXF) with a closing price of $113.39.

Value Line writes:

     > Fox Factory Holding Corp. designs, engineers, manufactures, and
     > markets performance ride dynamics products for customers
     > worldwide. Fox Factory Holding is the holding company of Fox
     > Factory, Inc. The company’s premium brand ride dynamics products
     > are used primarily on bicycles, side-by-side vehicles, onroad
     > vehicles with off-road capabilities, off-road vehicles and
     > trucks, all-terrain vehicles, snowmobiles, specialty vehicles
     > and applications, and motorcycles.

This medium-sized company has grown sales and EPS at annualized rates of 19.8% and 25.5% over the last 10 years. Lines are mostly up and parallel with slight EPS pullbacks in ’15 and ’20. PTPM over the last 10 years has increased from 9.5% to 14.5% with a last-5-year average of 13.8%. This beats peer (stated as THRM, ALSN, and GTX) and industry averages.

ROE has trended down from 28.5% in ’13 to 19.2% in ’21 with the last five years averaging 20.3%: slightly better than peer and industry averages. Debt-to-Capital has ranged from 8% (’13) to 35.5% (’20) over the last nine years with a last-5-year average of 25.2%: lower than peer and industry averages. Interest Coverage is 28, and the company has no long-term debt.

I assume long-term annualized sales growth of 8% based on the following:

• CNN Business projects 23.1% YOY and 14.4% per year for ’22 and ’21-’23, respectively (based on 6 analysts).
• YF projects YOY 21.4% and 5.4% for ’22 and ’23, respectively (7 analysts).
• Zacks projects YOY 21.4% and 5.1% for ’22 and ’23, respectively (5).
• Value Line projects 8.5% annualized from ’21-’26.

I assume long-term annualized EPS growth of 9% based on the following:

• CNN Business projects 17.1% YOY and 13.3% per year for ’22 and ’21-’23, respectively (based on 6 analysts), along with a 5-year annualized estimate of 14.4%.
• MarketWatch projects annualized ACE of 13.5% and 12.4% for ’21-’23 and ’21-’24, respectively (7 analysts).
• Nasdaq.com projects 9.5% YOY and 9.4% per year for ’23 and ’22-’24, respectively [5, 5, and 1 analyst(s) for ’22, ’23, and ’24].
• YF projects YOY 17.1% and 9.7% for ’22 and ’23, respectively, and 15% annualized for the next five years (7).
• Zacks projects YOY 17.1% and 9.5% for ’22 and ’23, respectively, and 13.8% annualized for the next five years (5).
• Value Line projects 12.6% annualized from ’21-’26.

I’m forecasting beneath the range (12.6%) of four long-term estimates.

My Forecast High P/E is 27. High P/E has ranged from 26.1 (’14) to 51.1 (’20) and trended higher since 2013. The last-5-year average is 42.9.

My Forecast Low P/E is 15. Low P/E has ranged from 14.7 (’16) to 26.3 (’21) since 2013. The last-5-year average is 20.6.

My Low Stock Price Forecast is $67.20, which is the default value. This is 40% less than the previous closing price and just below the 52-week low of 69.3. The stock has had a big run-up in price over the last few months.

All this results in an U/D ratio of 1.6, which makes FOXF a Hold. Total Annualized Return (TAR) is 10.4%.

While TAR is decent, PAR (using Forecast Average, not High, P/E) is only 5%. I want more from a medium-sized company.

For more context, I like to assess margin of safety (MOS) by comparing with Member Sentiment (MS). Out of 212 studies over the past 90 days, projected sales, projected EPS, Forecast High P/E, and Forecast Low P/E average 12.9%, 13.2%, 31.3, and 18.9, respectively. I’m lower on all inputs and also lower than Value Line’s projected average annual P/E of 25 (vs. 26.1 for MS and 21 for me). The average MS Low Stock Price Forecast is also above mine at $68.87.

The MOS is alive and well in this study: enough to preclude a buy over $97/share.

*—Publishing in arrears as I’ve been doing one stock study per day while usually posting two blogs per week.