Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 stocks made the list for top value stocks in the Recreational Products industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Recreational Products Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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3 Undervalued Recreational Products Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Recreational Products industry for Wednesday, September 18, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Recreational Products industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Brunswick Corporation’s Value Grade

Value Grade:

Brunswick Corporation designs, manufactures and markets recreational marine products, including marine propulsion products and boats, as well as parts and accessories for the marine and RV markets. Its segments include Propulsion, Engine Parts and Accessories (Engine P&A;), Navico Group and Boat. The Propulsion segment designs, manufactures and sells engines, controls, rigging, and propellers globally. The Engine P&A; segment sells products such as engine parts and consumables including oils and lubricants, electrical products, boat parts and systems, and also includes its marine parts and accessories distribution businesses. The Navico Group segment designs, develops, manufactures, and markets products and systems for the marine and RV, specialty vehicle markets. The Boat segment consists of the Brunswick Boat Group (Boat Group), which manufactures and distributes recreational boats, and Business Acceleration. Its boat brands include Boston Whaler, Lund, Sea Ray and Bayliner.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Brunswick Corporation has a Value Score of 63, which is considered to be undervalued.

When you look at Brunswick Corporation’s price-to-sales ratio at 0.96 compared to the industry median at 0.75, this company has a higher price relative to revenue compared to its peers. This could make Brunswick Corporation’s stock less attractive for value investors.

Brunswick Corporation’s price-earnings ratio is 15.76 compared to the industry median at 20.38. This means it has a lower share price relative to earnings compared to its peers. This could make Brunswick Corporation more attractive for value investors.

Now, let’s assess Brunswick Corporation’s EV/EBITDA ratio, also known as enterprise multiple. At 7.4, when compared to the industry median of 9.4, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Brunswick Corporation’s shareholder yield is higher than its industry median ratio of 0.46%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. Brunswick Corporation’s price-to-book ratio is higher than its industry median ratio of 1.42. This could make Brunswick Corporation less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Brunswick Corporation’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Brunswick Corporation’s price-to-free-cash-flow ratio is higher than its industry median ratio of 12.78. This could make Brunswick Corporation less attractive because the higher P/FCF ratio indicates that Brunswick Corporation is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

BRP Inc’s Value Grade

Value Grade:

BRP Inc. is a Canada-based company that specializes in powersports products, propulsion systems and boats. Its segments include Powersports and Marine. Powersports segment comprises Year-Round Products (all-terrain vehicles, side-by-side vehicles and three-wheeled vehicles), Seasonal Products (snowmobiles, personal watercraft and pontoons) and Powersports PA&A; and OEM Engines (parts, accessories and apparel (PA&A;), engines for karts and recreational aircraft, Pinion gearboxes and other services). Marine segment consists of boats, pontoons, jet boat and outboard engines and related PA&A; and other services. Its brands include Ski-Doo and Lynx snowmobiles, Sea-Doo watercraft and pontoons, Can-Am on and off-road vehicles, Alumacraft and Quintrex boats, Manitou pontoons and Rotax marine propulsion systems and Rotax engines for karts and recreational aircraft. It is developing electric models for its existing product lines and exploring new low voltage and human assisted product categories.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

BRP Inc has a Value Score of 70, which is considered to be undervalued.

BRP Inc’s price-earnings ratio is 19.4 compared to the industry median at 20.4. This means that it has a lower price relative to its earnings compared to its peers. This makes BRP Inc more attractive for value investors.

BRP Inc’s price-to-book ratio is lower than its peers. This could make BRP Inc more attractive for value investors when compared to the industry median at 1.42.

You can read more about BRP Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Topgolf Callaway Brands Corp’s Value Grade

Value Grade:

Topgolf Callaway Brands Corp. is a golf and active lifestyle company. The Company provides golf entertainment experiences, designs, and manufactures golf equipment, and sells golf and active lifestyle apparel and other accessories through its family of brand names, which include Topgolf, Callaway Golf, Odyssey, TravisMathew, Jack Wolfskin, OGIO, Toptracer and World Golf Tour. Its segments include Topgolf, Golf Equipment, and Active Lifestyle. The Topgolf is a technology-enabled golf entertainment business. Its platform offers open-air golf and entertainment venues as well as its Toptracer ball-tracking technology and digital media platform. The Golf Equipment segment is engaged in designing, manufacturing, and selling a full line of golf equipment, which is comprised of the golf clubs and golf balls product groups. Under Active Lifestyle segment, the Company designs, develops and sells soft good products under the Callaway, TravisMathew, OGIO, and Jack Wolfskin brands.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Topgolf Callaway Brands Corp has a Value Score of 67, which is considered to be undervalued.

Topgolf Callaway Brands Corp’s price-earnings ratio is 122.5 compared to the industry median at 20.4. This means that it has a higher price relative to its earnings compared to its peers. This makes Topgolf Callaway Brands Corp less attractive for value investors.

Topgolf Callaway Brands Corp’s price-to-book ratio is higher than its peers. This could make Topgolf Callaway Brands Corp less attractive for value investors when compared to the industry median at 1.42.

You can read more about Topgolf Callaway Brands Corp’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Recreational Products Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Recreational Products stocks as well as other industrys.

Choosing Which of the 3 Best Recreational Products Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Brunswick Corporation stock has a Value Grade of B.
• BRP Inc stock has a Value Grade of B.
• Topgolf Callaway Brands Corp stock has a Value Grade of B.

Now that you have a bit more background about each of the 3 undervalued stocks in the Recreational Products industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Recreational Products Stocks

Want to learn more about Recreational Products stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 3 Undervalued Recreational Products Stocks for Wednesday, September 18
• Why OneWater Marine Inc’s (ONEW) Stock Is Up 5.59%
• Why Escalade Inc’s (ESCA) Stock Is Down 10.43%
• 3 Undervalued Recreational Products Stocks for Friday, September 13

AAII Disclaimer

We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because past, hypothetical or simulated performance is not necessarily indicative of future results. Before making an investment decision, you should consider your circumstances and whether the information on our content is applicable to your situation. This information was prepared in good faith and we accept no liability for any errors or omissions. The full disclaimer can be read here.