Introduction:
In this stock analysis, we will direct our focus towards Thule Group, a Swedish company renowned for its dedication to equipment for an active lifestyle. We will explore key factors related to the company's finances, strengths, weaknesses, and how the emphasis on quality has shaped their position in the market.
What does Thule Group do?
Thule is a company listed on the Swedish stock exchange. It is a outdoor and leisure company that focuses on several niche product groups, which can be categorized into four segments.
Car carriers: In this segment, Thule provides equipment for car roofs and tow hitches, primarily designed for transporting recreational gear by car. Examples include bike racks, ski equipment, and rooftop tents. The car segment accounts for 62% of all Thule sales.
RV and Camping Equipment: Similar to the car segment, Thule offers equipment for camping trailers and campervans, including tents, bike racks, and awnings. Camping equipment represents 18% of Thule's sales.
Pets and Children's Products: This segment includes products such as child seats, bike trailers, and strollers. Currently, this area accounts for 11% of Thule's sales, and it is one of the areas where Thule expects significant future growth.
Luggage, bags and Carrying Packs: This category encompasses items like suitcases, backpacks, leisure bags, camera bags, and laptop cases. It is a well-diversified area that targets different market segments. However, this segment contributes a relatively small portion to Thule's overall revenue and is not one where Thule holds a leading market position. Currently, Thule has about 9% of sales in this segment.
Strategy
In my analysis of Thule, I conclude that they prefer to decentralize, a choice that may incur higher costs but provides a clear advantage in understanding the diverse needs across the world.
This approach helps maintain their specialist focus around their brand.
Furthermore, their strategy revolves around the motto "Active Life, Simplified." This indicates their commitment to finding ways to make outdoor activities more accessible and creating products aligned with this vision.
They are dedicated to preserving their position as one of the leading outdoor companies globally, with a focus on innovation, brand strength, growth, and maintaining a robust financial position
A bit about finances
Overall, I would say that the finances look quite robust. Thule is projected to finish both 2022 and 2023 with positive results, which is noteworthy considering the global challenges and significant economic pressures in Western regions.
Their peak earnings year was in 2021, and this may indicate what we can expect in normal times. They seem to have reasonable control over interest rates, but they require sales to demonstrate this control.
In general, Thule gets a thumbs up from my side, with a focus on monitoring whether they maintain their sales.
Statement
They have doubled their revenues since 2014 and significantly improved the margin, resulting in the impressive outcome you see below.
They maintain reasonable control over production costs and interest rates. This reassures me about the outcome even with a decline since 2021, which was the peak year.
Offcourse the currency is helping a bit so that is a bit of a risk in it to watch out for.
Income | Ebit | EBT | Result | |
2014 | 4556 | 644 | 321 | 236 |
2015 | 5320 | 825 | 765 | 587 |
2016 | 5304 | 922 | 653 | 676 |
2017 | 5872 | 1067 | 690 | 707 |
2018 | 6484 | 1163 | 1114 | 837 |
2019 | 7038 | 1195 | 1146 | 883 |
2020 | 7828 | 1591 | 1527 | 1166 |
2021 | 10386 | 2340 | 2303 | 1790 |
2022 | 10138 | 1706 | 1647 | 1275 |
2023 | 9132 | 1505 | 1420 | 1099 |
Balance
The balance sheet itself is quite decent. Personally, I prefer higher equity than debt, but they have maintained good control over the interest-bearing debt over time.
In 2023, they have lower debt than in 2014, indicating a willingness to pay down debt at least. What catches my attention the most here is that liquidity is the lowest since 2014.
If we delve deeper into the balance sheet, they have also divested a significant amount of inventory, going from 3129 to 2300.
Debt | Equity | Assets | Interest bearing debt | Cash | |
2014 | 3986 | 2966 | 6952 | 2511 | 114 |
2015 | 3671 | 3228 | 6899 | 2483 | 274 |
2016 | 4057 | 3826 | 7883 | 2598 | 763 |
2017 | 3818 | 3467 | 7285 | 2431 | 581 |
2018 | 3685 | 4012 | 7697 | 2316 | 186 |
2019 | 3955 | 4330 | 8285 | 2553 | 268 |
2020 | 3195 | 5253 | 8448 | 1284 | 706 |
2021 | 4377 | 5815 | 10192 | 1803 | 149 |
2022 | 5126 | 6553 | 11679 | 3139 | 176 |
2023 | 4117 | 3180 | 10966 | 2038 | 94 |
Cash flow
he changes in inventory are what lead to the significant increase in cash flow in 2023. This is likely something that will be reclaimed through debt in the course of 2024, so don't rule out the possibility that the company might increase its debt ratio quite a bit during this year.
They offer relatively high dividends based on income, but this may not be very apparent when the company is valued at a PE of 30.
In general, the cash flow seems decent, although it is highly unstable.
Operations | Investment | Finance | Dividend | |
2014 | 355 | 354 | -987 | 0 |
2015 | 662 | -37 | -465 | -200 |
2016 | 878 | -222 | -169 | -253 |
2017 | 972 | 17 | -1169 | -1113 |
2018 | 606 | -253 | -749 | -619 |
2019 | 1030 | -171 | -779 | -722 |
2020 | 1614 | -170 | -1001 | - |
2021 | 1128 | -503 | -1186 | -1621 |
2022 | 616 | -464 | -136 | -1359 |
2023 | 1850 | -251 | -1679 | -967 |
Key ratios
With a focus on the margin, it can be observed that it has increased significantly since 2014. Regarding the cost per sale, it remains relatively stable, but the interest cost has been much more controlled.
It seems that they can command a slightly higher price for their products, and the fact that they are maintaining the current margin in this market can be considered quite positive.
The debt ratio based on debt to EBIT is quite strong, which mitigates some risk in this cyclical stock.
EBIT margin | Margins | ROA | ROE | Debt-to-EBIT Ratio | |
2014 | 14.14% | 5.18% | 3.39% | 7.96% | 4.35 |
2015 | 15.51% | 11.03% | 8.51% | 18.18% | 3.03 |
2016 | 17.38% | 12.75% | 8.58% | 17.67% | 2.85 |
2017 | 18.17% | 12.04% | 9.70% | 20.39% | 2.31 |
2018 | 17.94% | 12.91% | 10.87% | 20.86% | 2.02 |
2019 | 16.98% | 12.55% | 10.66% | 20.39% | 2.19 |
2020 | 20.32% | 14.90% | 13.80% | 22.20% | 0.86 |
2021 | 22.53% | 17.23% | 17.56% | 30.78% | 0.80 |
2022 | 16.83% | 12.58% | 10.92% | 19.46% | 1.90 |
2023 | 16.48% | 12.03% | 15.06% | 34.56% | 1.44 |
Strengths in the stock:
Diversified globally: Thule has a global presence, reducing the company's vulnerability to regional economic challenges.
Outperforms expectations: The company performs better than expected, as indicated by results exceeding forecasts.
Market-leading with a good reputation: Thule has achieved a leading position in the market and enjoys a positive reputation.
Stable finances: The company demonstrates stable financial performance, providing investors with a degree of reliability.
Segments with growth potential: Thule has identified segments with growth potential, ensuring future earnings.
Diversified product line: The company's wide range of products provides a diversified income stream, increasing resilience to market fluctuations.
Weaknesses in the stock:
Typically expensive products: Thule's products can be costly, limiting market adoption, especially in price-sensitive segments.
Distributes too much of the profit as dividends: A high dividend payout can limit the company's ability to invest in growth opportunities or strengthen its balance sheet.
Shares are gradually phased out: The expression "shares are washed out" suggests a gradual reduction in the company's ownership, which can impact the stock's stability in the market over time.
2014 | Amount of shares |
2015 | 85894 |
2016 | 100000 |
2017 | 101002 |
2018 | 102564 |
2019 | 103119 |
2020 | 103350 |
2021 | 103785 |
2022 | 104562 |
2023 | 104562 |
2014 | 105.7 |
Niche Products: Niche products may expose the company to fluctuations in those specific markets
Expensive Stock: With a P/E of about 30, Thule looks to be quite expensive at least when we think of them as a cyclical company falling in sales 2 years in a row.
Logistical Weaknesses: With lower inventory, Thule is currently more vulnerable to changes in production and logistics.
What to keep an eye on
Logistical problems can lead to high shipping costs at a time when Thule has significantly reduced inventory.
How sales pick up, and the positive reaction to interest rate changes. In this stock, there is an expectation of growth priced in, and if they don't maintain this, it could create problems at the current price.
Their new product catalog.
If we have less and less working time, this increases the need for positive outdoor experiences. This can result in very positive sales boosts for Thule.
Short Summary
In this analysis of Thule, we can conclude that it functions as a cyclical stock, typically performing less well in weaker economic times. This aligns with the observed stock movements, but it's noteworthy that Thule maintains a positive bottom line and appears to be quite resilient.
Their products are often of the more expensive kind, but they target a niche market of particularly interested consumers and cater to goods deemed "essential."
This places Thule in a very favorable position as a cyclical stock, where they have demonstrated strength.
They are a highly valued stock, but this might signal how strong the stock is and the high expectations placed on it going forward.
I hope you have enjoyed my analysis of Thule.
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