Durable goods stocks are an interesting play, as they represent an investment in the mid- to long-term on behalf of everyday consumers. From iconic coats to long-lasting children’s toys to water sports, the following list of consumer durable stocks has something for every retail and consumer market bull looking to cream some capital gains on the TSX Index.
BRP (TSX: DOO)(NASDAQ:DOOO)
Starting off with a luxury goods stock, BRP is perhaps best known for its adventure sports products, such as Ski-Doo and Lynx snowmobiles, Can-Am motorcycles, as well as the small Sea-Doo water crafts and SportBoats. It’s got the kind of stats you’d expect from a luxury stock, too, from three-year returns of 100.6% to an expected three-year ROE of 58.6%.
BRP’s slightly negative one-year past earnings growth rate is mitigated by a positive five-year average past earnings growth of 34.1%, and though it currently has negative shareholder equity, an inadequate balance sheet is balanced at least by decent value (as shown by a P/E of 18 times earnings and a 19% discount off the future cash flow value).
Dorel Industries (TSX: DII.B)
Peddling bicycles and other durable toys, Dorel Industries’ stock recently hit a 52-week low, and in many respects resembles BRP in terms of its overall spread of stats. As BRP caters to adults looking for big toys, Dorel Industries is in the business of keeping younger consumers happy, and therein lies the recession-proof quality of both stocks.
There are a couple of things for would-be shareholders to be aware of here: first, Dorel Industries’ level of debt to net worth has more than doubled over the past five years, going from 32% to the current 84.9% (however, that debt is well covered by its operating cash flow); selling at around twice its future cash flow value, it’s also intrinsically overvalued, despite trading at half its book price.
With some inside buying over the past six months and a big dividend yield of 6.94%, Dorel Industries’ 137.1% expected annual growth in earnings is one of the most positive outlooks of any stock currently trading on the TSX index.
Canada Goose (TSX: GOOS)(NYSE: GOOS)
Perhaps one of the most recognizable domestic brands on the TSX Index, Canada Goose’s products are investments in themselves, and their demographic is perhaps unlikely to stop buying through a recession, making for a potentially all-weather ticker.
Canada Goose’s past-year returns of 52.3% easily beat the Canadian luxury goods industry, while its one-year past earnings growth of 120.9% and five-year average of 55.1% make for a solid track record. In the past year, Canada Goose made good use of its shareholders’ funds with a 37% return on equity, while a debt level of 37.9% of net worth denotes an adequate balance sheet.
The bottom line
Canada Goose remains a winner for the growth investor with a purely capital gains-focused strategy, while BRP’s dividend yield of 0.96% and 21.1% expected annual growth in earnings make for a low-end passive income investment. Dorel Industries is better value than the luxury clothing stock, with the latter trading with a P/E of 53 times earnings and P/B of 19.6 times book, and lower expected annual growth in earnings at 28.2%.
