Americans are off-roading now more than ever, thanks to the pandemic. Outdoor activities such as off-roading, golfing, fishing, and hunting have never been more popular. These activities can be enjoyed while social distancing and without the assistance of another person, making them perfect for modern times.
Those who took up off-roading as a hobby during the pandemic will likely continue enjoying the greater outdoors in off-road vehicles long after coronavirus is an afterthought. The publicly traded companies that make off-road vehicles stand to benefit from the uptick in interest.
Search for off-road automotive stocks, and you will find two emerge as attractive plays: Polaris (PII) and Fox Factory Holding Corp. (FOXF). Let's take a look at these two off-road vehicle stocks to get a sense of which is the better play.
Polaris (PII)
PII designs and makes off-road vehicles, motorcycles, and snowmobiles. The company also sells replacement parts, accessories, and garments to boot. These items are sold through distributors and dealers across the United States, Europe, and Canada.
PII is currently trading at $128.78, about $20 below its 52-week high. However, PII's forward P/E is relatively modest at 14.29, so buying at this level provides solid value. The stock's 52-week low is $80.50. However, PII has a fairly high beta of 2.01, meaning it will prove volatile during market undulations.
PII has an overall grade of B, which translates into a Buy rating in our POWR Ratings system. The stock has B grades in the Quality, Momentum, Value, and Growth components of the POWR Ratings. Click here to learn more about how PII fares in the Sentiment and Stability components. Of the 56 publicly traded companies in the Auto & Vehicle Manufacturers industry, PII is ranked just outside the top 10, slotting in at number 11. Investors can find other top stocks in this industry by clicking here.
Analysts have established an average target price of $156.60 for PII, indicating a potential 18% upside. The highest target price for the stock is $170, while the low is $112. A total of 17 analysts have issued recommendations for the stock. Four rate PII as a Strong Buy, and seven rate it as a Buy.
Fox Factory Holding Corp. (FOXF)
FOXF designs, makes, and markets suspension products for off-road vehicles, mountain bikes, and snowmobiles.
FOXF is currently trading at $153.67. The stock's forward P/E ratio is an elevated 39.73. However, this high forward P/E ratio is partially justified when you factor in the stock is trading only $15 below its 52-week high of $166.88.
FOXF has an overall grade of C, translating into a Neutral rating in the POWR Ratings system. FOXF has B grades in the Momentum, Quality, and Growth components, but a Value Grade of D. You can find how FOXF grades in the Sentiment and Stability components by clicking here. Of the 56 publicly traded companies in the Auto & Vehicle Manufacturers segment, FOXF is ranked 30th.
Analysts are bearish on FOXF, setting an average target price of $102.29 for the stock. If FOXF were to fall to this level, it would have dropped by nearly 33%. The highest target price for the stock is $118, while the lowest is $102.29.
Which is the Better Buy?
PII is the better play of the two. PII has a better rating in the POWR Ratings and a superior industry ranking. Plus, if you break down each stock's components grades, you will find PII has better individual component grades. If you want to capitalize on the off-roading trend, PII is clearly a better buy.
PII shares fell $0.14 (-0.11%) in premarket trading Friday. Year-to-date, PII has gained 36.24%, versus a 11.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.
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