Winnebago Industries (NYSE:WGO) reported earnings on October 19 and delivered a beat on both its top and bottom lines. The company posted earnings per share (EPS) of $3.02 on revenue of $1.18 billion. That was above the $2.97 EPS on revenue of $1.11 billion that was forecast.  

Those numbers were also stronger on a year-over-year (YOY) basis. Earnings were up 17% from the prior year and revenue was up 13%.  

But you wouldn’t know that by looking at the WGO stock price which is down over 11% in mid-morning trading. The stock had been climbing higher recently so this may be a case of investors deciding to take some profits in this bear market rally. Plus, short interest in the stock is above 18%.  

That may make Winnebago stock unappealing for traders. But if you’re an investor with a long-term outlook, this article will look at whether there is value in buying Winnebago stock. 

Demand Remains Strong 

One concern about Winnebago and other companies in the recreational vehicle (RV) space was that demand would trail off. RVs are long-term purchases so once people have their RV, they won’t be back in the market for a long time. There was also some sentiment that consumers would switch to different forms of transportation as pandemic restrictions eased.  

But the company's earnings report tells a different story. Winnebago reported a 24% revenue increase in its motorhome division, and this was even as the company is raising prices. The company’s marine division is also showing strength with a 42% rise in sales. And the company says that there is still a high backlog for marine products. That bodes well as we enter the time when consumers began to think about next summer.  

To be fair, all wasn’t great. Winnebago did report a 12% decline in its towable division. But overall, this was a report that did nothing to change the idea that demand is softening. On the earnings call, Winnebago CEO Michael Happe did sound a cautionary note about “uncertain market conditions” that would persist into next year. However, Happe also said he was “confident that our transformed and evolving business platform” would position the company for continued success.  

An Attractive Valuation 

Winnebago stock is down 29% in 2022. That’s despite the fact that the company continues to show higher year-over-year revenue and earnings. And in the case of a company like Winnebago comparisons to 2021 are significant. Production was hindered by pandemic restrictions and supply chain problems in 2020. So, 2021 was the recovery year.  

Investors, it seems, are banking on the fact that the company can’t keep up with that kind of growth. If that’s the case, the numbers don’t support that thesis.  

And with a price-to-earning ration of just over 5x, Winnebago is not a bad candidate for investors who are looking for a stock that may have all the bad news already priced into it.  

Smaller Growth, but Historically Good Growth 

Investing would be easy if we knew for certain what was going to happen. Since we don’t, we rely on analysts’ forecasts. In the case of Winnebago, 2022 is projected to be the high point for revenue and earnings in the next five years.  

But even with declining yearly revenue and earnings over the next five years, both are still projected to be well above pre-pandemic levels. That is not being reflected in the WGO stock price. Given the current macroeconomic conditions, that’s not too surprising. It does, however, support the notion that Winnebago may be undervalued in the current market.