With it being a fairly slow news day, we thought this would be a good opportunity to profile a name that has been quietly trading to new all-time highs: Fox Factory Holding (FOXF). It's a bit of a volatile stock that has had sharp moves up and down in short periods of time. However, it's definitely on an upswing right now following some key events.
FOXF is a supplier of performance shock absorbers and racing suspensions used in bicycles, side-by-side vehicles, on-road and off-road vehicles and trucks, ATV's, snowmobiles, and motorcycles. Its brand is known as being high-performance, providing users with improved control and a smoother ride while riding over rough terrain. Because of its premium product status, its products are generally sold at higher price points.
In particular, Fox has a strategic focus on the performance and racing segments in its markets. Pro athletes use Fox products in competitive events such as the X Games. These types of events provide great exposure for the brand. The company makes sure that its FOX logo is prominently displayed on bikes and powered vehicles sold by OEM customers.
The company has been pretty busy in recent months. On May 1, FOXF reported solid Q1 results with adjusted EPS jumping to $0.55, well above prior guidance of $0.44-0.49. Revenue rose 24.6% yr/yr to $161.7 mln, which was also much better than expected. CEO Larry Enterline announced his retirement. Mike Dennison, who ran the Powered Vehicles Group, is being promoted to CEO on June 29.
In addition, on May 6, FOXF acquired Air Ride Technologies, dba Ridetech. Ridetech makes "suspension systems that enhance the handling and ride quality of muscle cars, trucks, sports cars and hot rods...giving FOX an opportunity to enter the exciting street performance market," according to the press release. It was not a large deal as FOXF is paying just $14 mln, but it's a brand-new market for FOXF with room for additional expansion.
FOXF has been making a strong move of late. A year ago, the stock was trading around $47 and now it's trading around $80, including a 20% move in the past month. A series of strong earnings results has been powering the stock higher. Fox has been boosting its US manufacturing capacity to keep up with demand. What's impressive to us is that FOXF is able to charge premium prices because its brand is so strong. This has led to nice margins as adjusted EBITDA margin in Q1 improved to 18.6%, which is quite robust, from 17.7% last year.
Fox says its powered vehicle segment remains an exciting growth area and we think that division's CEO will make this a higher priority than others would have. With that said, the stock looks overextended in the near term, but is worth keeping on the radar on pullbacks.