Pitch a tent in Camping World Stock

Reseller of camping and recreational vehicle (RV) products Camping World (NYSE: CWH) has been a direct beneficiary of the pandemic as consumers have discovered or rediscovered outdoor recreational activities. The lifting of COVID restrictions and the spread of vaccinations have not stopped Camping World's growth. Investors wonder if a new normal is emerging for the industry. From a valuation perspective, the shares are trading very cheaply at just 5.3 times forward earnings with a high annual dividend of 8.75%, assuming forward estimates are not revised down. . It's actually trading at a cheaper valuation than RV makers Winnebago (NYSE:WGO) trading a low 4.1X forward earnings with a miserly 1.9% annual dividend yield or Thor Industries (NYSE :THO) is trading at 9.2X forward earnings and a 2.3% annual dividend yield.

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Preparing for a recession

The US Federal Reserve has raised interest rates by 3% over the past six months in an attempt to rein in runaway inflation. However, results have been slow to materialize as September headline CPI was 8.2%, missing analysts' estimates of 8.1% but still showing progress from June highs of 9.1. %. The drop (-36%) in August RV shipments for the industry may presage a decline in Camping World RV sales. The normalization and the possibility of a slowdown in sales to be reported in its next earnings report should give investors pause before rushing into the stock. The RV sector has been booming since the pandemic shutdowns and it appears to be very sticky as underlying consumer lifestyle changes continue to drive demand. However, rising interest rates and lower consumer discretionary spending have likely weighed on demand and investors should prepare for a possible shortfall. Supply chain constraints have eased, as evidenced by the fact that vehicle inventories have more than doubled since the same period last year.

Minimal and mobile lifestyle trend driver

The pandemic has amplified the trend towards minimalist and mobile living, experiential travel and outdoor recreation. There are many new content providers on YouTube (NASDAQ:GOOGL) exposing the joys of van and RV life as a lifestyle adjustment that goes beyond a vacation, but applicable as a mobile home and desk. It's possible a recession could push more consumers toward minimalist, mobile living, especially as fuel costs continue to fall.

Is normalization coming in Q3 2022?

On August 2, 2022, Camping World released its fiscal second quarter 2022 results for the quarter ending June 2022. The company reported earnings of $2.16 per share, beating analyst estimates of 1. $79 per share from $0.37 per share. Revenue rose 5.2% year-over-year (YoY) to $2.17 billion, beating analyst consensus estimates of $2.03 billion. New and used vehicle inventories rose to $1.7 billion from $782.5 billion a year ago as supply chain restrictions eased. The Company continues to pay its quarterly dividend of $0.625 per share or its annualized dividend of $2.50 per share.

The prophet speaks

Marcus Lemonis, CEO of Camping World, said, “We are delighted with the sale of nearly 39,000 new and used RVs, which contributed to record second quarter revenues. has both the focus and the experience to lead our business through changing market conditions, as evidenced by our strong financial results."

Here's what the charts say