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.
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.