BRP (TSX: DOO) is a Quebec-based company that designs, develops, manufactures, distributes, and markets powersports vehicles and marine products in Canada, the United States, and around the world. Today, I want to discuss why this is the next TSX stock I’m looking to buy in 2023. Let’s jump in.
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How has this TSX stock performed recently?
Shares of this TSX stock have climbed 3.2% year over year as of early afternoon trading on January 30. The stock has jumped 7% in the first trading month of 2023. That is an encouraging start for BRP in the new year. Investors who want a more detailed look can play with the interactive price chart below.
Here’s why I’m excited about the powersports market
Powersports are a subset category of motorsports. These include vehicles like motorcycles, all-terrain vehicles, snowmobiles, personal watercraft, and scooters — all the types of vehicles that your parents would love to see your ride in your youth. The industry took a major hit during the COVID-19 pandemic, as demand for these vehicles and the activities connected to them cratered. Fortunately, there has been a steady recovery since the worst of the health crisis has waned.
Fortune Business Insights released a report on the future of the powersports market back in 2019. At the time, it estimated that the market was valued at US$9.44 billion in the same here. Meanwhile, it forecasts that this market will grow from US$8.76 billion in 2020 to US$12.7 billion by 2027. That would represent a compound annual growth rate (CAGR) of 5.5% over the forecast period.
Should investors be impressed with BRP’s earnings?
Investors can expect to see BRP’s fourth-quarter (Q4) fiscal 2023 earnings in the month of March. It unveiled its Q3 FY2023 results on November 30, 2022.
BRP delivered revenue growth of 71% to $2.70 billion in the third quarter of fiscal 2023. That represented a record single-quarter performance for the company. EBITDA stands for earnings before interest, taxes, depreciation, and amortization. This measure aims to give a better picture of a company’s profitability. BRP delivered normalized EBITDA growth of 94% to $488 million in the third quarter FY2023.
Retail sales for powersports products increased 43% compared to the prior year. Moreover, it posted market share gains for the side-by-side-product market in its North American market. It posted revenues of $6.95 billion in the first nine months of fiscal 2023 — up from $5.30 billion in the previous year. Meanwhile, gross profit rose to $1.71 billion in the year-to-date period compared to $1.52 billion for the year-to-date period in fiscal 2022.
This positive quarter inspired BRP to bolster its full-year guidance. It now expects full-year normalized earnings per share (EPS) between $11.65 to $12.00.
Why I’m looking to buy this TSX stock today
Shares of this TSX stock currently possess a favourable price-to-earnings ratio of 12. It is trading in more attractive value territory than the industry average. BRP also offers a quarterly dividend of $0.16 per share, which represents a modest 0.5% yield.
