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Category: Stock Market and Fox Factory Holdings
Date: 4 March 2020 Stock Price: $60.69 We take a look at the 4th quarter 2019 earnings release of Fox Factory Holdings, a company that designs, engineers and manufactures and markets performance products used on bicycles, vehicles, on-road vehicles with and without off-road capabilities as well as for trucks and all-terrain vehicles (ATVs)
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About Fox Factory Holdings
Fox Factory Holding Corp. designs, engineers, manufactures and markets performance-defining products and systems for customers worldwide. Fox Factory Holding Corp. is the holding company of FOX Factory, Inc. Our premium brand, performance-defining products and systems are used primarily on bicycles, side-by-side vehicles, on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, all-terrain vehicles (ATVs), snowmobiles, specialty vehicles and applications, motorcycles, and commercial trucks. Some of our products are specifically designed for and marketed to a variety of leading cycling and powered vehicle original equipment manufacturers ("OEMs"), while others are distributed to consumers through a global dealer and distribution network.
Overview of Fox Factory's 4th quarter 2019 earnings report
The data below refers to the latest quarter unless specified otherwise
- Sales: $185.881 million (up from $156.810 million for the same quarter of the prior year)
- Sales increased by 18.5% over the last 12 months
- Cost of sales: $126.240 million (up from $105.857 million for the same quarter of the prior year)
- Cost of sales increased by 19.2% over the last 12 months
- So some margin pressure on Fox Factory as their sales grew at a slower rate than their cost of sales
- Net income: $22.522 million (up from $20.135 million for the same quarter of the prior year)
- Diluted earnings per share: $0.58 (up from $0.52 for the same quarter of the prior year)
- PE ratio of Fox Factory: 25.5
- Diluted shares outstanding in Fox Factory: 39.151 million (up from 39.083 million for the same quarter of the prior year)
- Cash and equivalents: $43.763 million
- Cash and equivalents per share: $1.12
- Cash and equivalents makes up 1.84% of Fox Factory's market capital
- Cash and equivalents makes up 7.17% of Fox Factory's total assets
- Inventories: $128.505 million (up from $107.140 million for the same quarter in the prior year)
- Inventories makes up 21% of Fox Factory's total assets
- Accounts payable: $91.632 million (up from $78.882 million for the same quarter in the prior year)
- Accounts payable makes up 15% of Fox Factory's total assets
- Stockholders equity in Fox Factory: $422.200 million
- Stockholders equity per share: $10.78
- So Fox Factory is trading at 5.62 times its stockholders equity which is outside the expected the range of between 2 and 4 times that most firms tend to trade at.
Fox Factory Holdings management commentary on their 4th quarter 2019 earnings
BRASELTON, Ga., March 03, 2020 (GLOBE NEWSWIRE) -- Fox Factory Holding Corp. (NASDAQ: FOXF) (“FOX” or the “Company”) today reported financial results for the fourth quarter and fiscal year ended January 3, 2020.
“We are pleased with our strong finish to fiscal 2019 from both our Powered Vehicles and Specialty Sports Groups. Our solid growth enabled us to generate record annual sales and profitability above our expectations,” commented Mike Dennison, FOX’s Chief Executive Officer. “We believe we are entering fiscal 2020 with solid business momentum and are excited about the growth opportunities ahead of us with our diversified product offerings and differentiated market position. We remain on track to complete our previously announced acquisition of SCA late in the first quarter of fiscal 2020.”
“We are pleased with our strong finish to fiscal 2019 from both our Powered Vehicles and Specialty Sports Groups. Our solid growth enabled us to generate record annual sales and profitability above our expectations,” commented Mike Dennison, FOX’s Chief Executive Officer. “We believe we are entering fiscal 2020 with solid business momentum and are excited about the growth opportunities ahead of us with our diversified product offerings and differentiated market position. We remain on track to complete our previously announced acquisition of SCA late in the first quarter of fiscal 2020.”
Acquisition of SCA Performance Holdings, Inc. (“SCA”)
As previously announced on February 12, 2020, the Company’s subsidiary, Fox Factory, Inc., has signed a definitive agreement to acquire 100% of the issued and outstanding capital stock of Southern Rocky Holdings, LLC. The $328 million transaction, exclusive of vehicle inventory, will be financed through an expanded and syndicated credit facility led by Bank of America. The Company also agreed to an additional $13 million of contingent, performance-based retention incentives for key SCA management payable over the next two years. The transaction is expected to close late in the first quarter of fiscal 2020, subject to customary closing conditions, and to be accretive to FOX’s fiscal 2020 financial results.
Fiscal 2020 Guidance
For the first quarter of fiscal 2020, the Company expects sales in the range of $182 million to $190 million and non-GAAP adjusted earnings per diluted share in the range of $0.55 to $0.60. For the fiscal year 2020, the Company expects sales in the range of $881 million to $906 million and non-GAAP adjusted earnings per diluted share in the range of $3.00 to $3.10. The Company’s full year 2020 guidance assumes a tax rate range of 15% to 19%.
Cost Savings Program from Continuing Operations
In the second quarter of fiscal 2020, Campbell achieved $45 million in savings under its multi-year cost savings program, inclusive of Snyder’s-Lance synergies, bringing total program-to-date savings to $650 million. Year-to-date savings of $90 million through the first half of fiscal 2020 are pacing on schedule. As previously announced, the company expects to deliver cumulative annualized savings of $850 million by the end of fiscal 2022.
As previously announced on February 12, 2020, the Company’s subsidiary, Fox Factory, Inc., has signed a definitive agreement to acquire 100% of the issued and outstanding capital stock of Southern Rocky Holdings, LLC. The $328 million transaction, exclusive of vehicle inventory, will be financed through an expanded and syndicated credit facility led by Bank of America. The Company also agreed to an additional $13 million of contingent, performance-based retention incentives for key SCA management payable over the next two years. The transaction is expected to close late in the first quarter of fiscal 2020, subject to customary closing conditions, and to be accretive to FOX’s fiscal 2020 financial results.
Fiscal 2020 Guidance
For the first quarter of fiscal 2020, the Company expects sales in the range of $182 million to $190 million and non-GAAP adjusted earnings per diluted share in the range of $0.55 to $0.60. For the fiscal year 2020, the Company expects sales in the range of $881 million to $906 million and non-GAAP adjusted earnings per diluted share in the range of $3.00 to $3.10. The Company’s full year 2020 guidance assumes a tax rate range of 15% to 19%.
Cost Savings Program from Continuing Operations
In the second quarter of fiscal 2020, Campbell achieved $45 million in savings under its multi-year cost savings program, inclusive of Snyder’s-Lance synergies, bringing total program-to-date savings to $650 million. Year-to-date savings of $90 million through the first half of fiscal 2020 are pacing on schedule. As previously announced, the company expects to deliver cumulative annualized savings of $850 million by the end of fiscal 2022.
Fox Factory stock price history
The image below, obtained from Google shows the stock price history of Fox Factory (NASDAQ:FOXF) for the last 5 years. As the image shows its been a very good time for Fox Factory. 5 years ago the stock of Foot Locker was trading at $14.90 a stock and its currently trading at $60.69 a stock. That's a significant return of 307% provided to Fox Factory stockholders over the last 5 years.
The stock of Fox Factory is trading at a lot closer to its 52 week low of $58.98 than it is to its 52 week high of $86.91 which to us is a clear indication that the short term sentiment and momentum of Fox Factory's stock is overwhelmingly negative at this point in time, as is the case with most stocks right now as the fears around Coronavirus spreads across global financial markets.
The stock of Fox Factory is trading at a lot closer to its 52 week low of $58.98 than it is to its 52 week high of $86.91 which to us is a clear indication that the short term sentiment and momentum of Fox Factory's stock is overwhelmingly negative at this point in time, as is the case with most stocks right now as the fears around Coronavirus spreads across global financial markets.
Recent coverage of Fox Factory
The extract below covers the latest earnings report from Foot Locker as obtained from TheStreet.com
BRASELTON, Ga., Feb. 12, 2020 (GLOBE NEWSWIRE) -- Fox Factory Holding Corp. (FOXF) ("FOX" or "the Company") announced today that its subsidiary, Fox Factory, Inc., has signed a definitive agreement to acquire 100% of the issued and outstanding capital stock of SCA Performance Holdings, Inc. ("SCA") from Southern Rocky Holdings, LLC, a portfolio company of Kinderhook Industries. The $328 million transaction, exclusive of vehicle inventory, will be financed through an expanded and syndicated credit facility led by Bank of America. The Company also agreed to an additional $13 million of contingent, performance-based retention incentives for key SCA management payable over the next two years. The transaction is expected to close late in the first quarter of fiscal 2020, subject to customary closing conditions, and to be accretive to FOX's fiscal 2020 financial results.
SCA is a leading OEM authorized specialty vehicle manufacturer ("SVM") for light duty trucks and SUVs with headquarters in Trussville, Alabama. They operate under three industry-leading, aftermarket brands: SCA Performance, Rocky Ridge Trucks, and Rocky Mountain Truckworks. This acquisition is complementary to FOX's Tuscany business, expanding its North American, geographic manufacturing footprint and broadening its product offering in a growing segment of the automotive industry. The combination of Tuscany and SCA as part of FOX's branded portfolio of premium products provides the Company with a leading market position. Additionally, this acquisition creates an opportunity to add FOX products, including lift kits and suspension components, to SCA's vehicles.
"We are excited to announce the acquisition of SCA, and believe it presents a substantial opportunity for FOX to further expand its performance-defining aftermarket solutions and continue to drive growth in our Powered Vehicles Group," stated Mike Dennison, FOX's Chief Executive Officer. "We look forward to further accelerating our already significant presence in the growing specialty vehicle manufacturing market. We welcome the experienced SCA leadership team and believe they will play an integral part in our Company's growth going forward."
Read the full article here
BRASELTON, Ga., Feb. 12, 2020 (GLOBE NEWSWIRE) -- Fox Factory Holding Corp. (FOXF) ("FOX" or "the Company") announced today that its subsidiary, Fox Factory, Inc., has signed a definitive agreement to acquire 100% of the issued and outstanding capital stock of SCA Performance Holdings, Inc. ("SCA") from Southern Rocky Holdings, LLC, a portfolio company of Kinderhook Industries. The $328 million transaction, exclusive of vehicle inventory, will be financed through an expanded and syndicated credit facility led by Bank of America. The Company also agreed to an additional $13 million of contingent, performance-based retention incentives for key SCA management payable over the next two years. The transaction is expected to close late in the first quarter of fiscal 2020, subject to customary closing conditions, and to be accretive to FOX's fiscal 2020 financial results.
SCA is a leading OEM authorized specialty vehicle manufacturer ("SVM") for light duty trucks and SUVs with headquarters in Trussville, Alabama. They operate under three industry-leading, aftermarket brands: SCA Performance, Rocky Ridge Trucks, and Rocky Mountain Truckworks. This acquisition is complementary to FOX's Tuscany business, expanding its North American, geographic manufacturing footprint and broadening its product offering in a growing segment of the automotive industry. The combination of Tuscany and SCA as part of FOX's branded portfolio of premium products provides the Company with a leading market position. Additionally, this acquisition creates an opportunity to add FOX products, including lift kits and suspension components, to SCA's vehicles.
"We are excited to announce the acquisition of SCA, and believe it presents a substantial opportunity for FOX to further expand its performance-defining aftermarket solutions and continue to drive growth in our Powered Vehicles Group," stated Mike Dennison, FOX's Chief Executive Officer. "We look forward to further accelerating our already significant presence in the growing specialty vehicle manufacturing market. We welcome the experienced SCA leadership team and believe they will play an integral part in our Company's growth going forward."
Read the full article here
Fox Factory (NASDAQ:FOXF) stock valuation
So what are Fox Factory stock worth based on their latest earnings report? Based on Foot Lockers latest earnings report and the fiscal guidance provided by Fox Factory our valuation model provides a target price (full value price) for Fox Factory at $50.80 a stock. We therefore believe that the stock of Fox Factory is overvalued at its current price.
We usually recommend that long term and fundamental investors look to enter a stock at least 10% below our target price (full value price) which in this case is $50.80 . A good entry point into Fox Factory would therefore be at $45.70 or below
We expect the stock price of Fox Factory to pull back from current levels to levels closer to our target price in coming weeks and months. Since the stock of Fox Factory is trading at well above our suggested entry point we rate the stock of Fox Factory as a sell.
We usually recommend that long term and fundamental investors look to enter a stock at least 10% below our target price (full value price) which in this case is $50.80 . A good entry point into Fox Factory would therefore be at $45.70 or below
We expect the stock price of Fox Factory to pull back from current levels to levels closer to our target price in coming weeks and months. Since the stock of Fox Factory is trading at well above our suggested entry point we rate the stock of Fox Factory as a sell.
Next earnings release of Fox Factory (NASDAQ:FOXF)
It is expected that Fox Factory will release their 1st quarter 2020 earnings report towards the end of May 2020