Cavco Industries, Inc. (CVCO) Hit a 52 Week High, Can the Run Continue?
Have you been paying attention to shares of Cavco (CVCO)? Shares have been on the move with the stock up 10.6% over the past month. The stock hit a new 52-week high of $300.5 in the previous session. Cavco has gained 32.3% since the start of the year compared to the 8.6% move for the Zacks Construction sector and the 18.3% return for the Zacks Building Products - Mobile Homes and RV Builders industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on February 2, 2023, Cavco reported EPS of $6.66 versus consensus estimate of $5.85 while it missed the consensus revenue estimate by 7.33%.
For the current fiscal year, Cavco is expected to post earnings of $27.36 per share on $2.2 billion in revenues. This represents a 28.21% change in EPS on a 34.95% change in revenues. For the next fiscal year, the company is expected to earn $25.59 per share on $2.25 billion in revenues. This represents a year-over-year change of -6.47% and 2.59%, respectively.
Cavco may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Cavco has a Value Score of B. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 10.9X current fiscal year EPS estimates, which is a premium to the peer industry average of 10.2X. On a trailing cash flow basis, the stock currently trades at 15.4X versus its peer group's average of 4.9X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Cavco currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Cavco passes the test. Thus, it seems as though Cavco shares could still be poised for more gains ahead.
How Does CVCO Stack Up to the Competition?
Shares of CVCO have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Skyline Corporation (SKY). SKY has a Zacks Rank of # 2 (Buy) and a Value Score of B, a Growth Score of A, and a Momentum Score of F.
Earnings were strong last quarter. Skyline Corporation beat our consensus estimate by 48.45%, and for the current fiscal year, SKY is expected to post earnings of $4.19 per share on revenue of $2.63 billion.
Shares of Skyline Corporation have gained 0.5% over the past month, and currently trade at a forward P/E of 10.18X and a P/CF of 14.46X.
The Building Products - Mobile Homes and RV Builders industry is in the top 39% of all the industries we have in our universe, so it looks like there are some nice tailwinds for CVCO and SKY, even beyond their own solid fundamental situation.
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