Polaris Industries Inc. (PII): Should You Invest in This Small Vehicle Maker?

Page 1 of 2

As an investor, you want a company that constantly seeks out new markets and products that enhance your cash flow. Motorized products maker Polaris Industries Inc. (NYSE:PII) seeks to do just that with recent acquisitions giving it added access to the European market and the reintroduction of an old iconic motorcycle brand. Looking at this company from the vantage point of strengths, weaknesses, opportunities, and threats will give you a good idea of its direction as an investment.

Polaris Industries Inc. (NYSE:PII)

Strengths

Diversity – As an owner you want a company with a variety of products with one picking up the slack in case another one fails. One of Polaris’ strengths lies in its product and geographic diversity from ATVs, motorcycles, small trucks, quadricycles, and snowmobiles. In addition, this company operates globally. Chairman and CEO Scott Wine realizes this and he has made reinforcing this strength “his personal mission” according to Polaris’ latest earnings call (sign-in required).

Manufacturing processes – Polaris Industries Inc. (NYSE:PII) utilizes efficient manufacturing methodology to reduce manufacturing and lead times to its dealers. In addition to improving return on equity, lower lead times translate into happier end consumers as this lessens the chance of them going to a competitor due to the lack of availability of their desired product.

Snowmobiles – Believe it or not, snowmobiles represented quite a strength for Polaris in its most recent quarter, with sales tripling versus the same time last year. This should raise an eyebrow at competitor Arctic Cat Inc (NASDAQ:ACAT).

Parts, garments, and accessories – Polaris’ product innovations and the acquisition of snowmobile accessory maker Klim served as catalysts for 27% growth in sales for its parts, garment, and accessories segment.

Fundamentals – Polaris Industries Inc. (NYSE:PII)’ strengths translated into good fundamentals. Its revenue increased 11% during its most recent quarter. Free cash flow turned from a negative $22 million to a positive $8 million. Polaris’ cash comprised 52% of its stockholder’s equity during its most recent quarter. Its long-term debt to equity stood at 14%.

Based on full year data, Polaris’ efficiency shows with return on equity clocking in at 45%, nearly double that of rivals Harley-Davidson, Inc. (NYSE:HOG) and Arctic Cat, which showed returns on equity of 24% and 23%, respectively.

Weaknesses

On road vehicles – On road vehicles showed the greatest weakness for Polaris, at least in its most recent quarter. Sales declined 3% due to lower motorcycle volume according to its latest earnings call.

Harley-Davidson retains the nationwide king of the motorcycles title with its largest competitor only commanding roughly 13% according to Harley-Davidson’s CFO in its most recent earnings call (sign-in required).

Opportunities

Indian motorcycles – Harley-Davidson’s market lead hasn’t dissuaded Polaris from trying to upend its market leading status. Polaris intends to reintroduce the iconic Indian brand later in 2013. While this may only make a dent in Harley-Davidson’s market share, it should prove to be a boon to Polaris’ shareholders as some consumers prefer options in the heavyweight motorcycle market. Management expects the Indian Motorcycle to contribute to a 50%-60% increase in its on road vehicle sales in 2013.

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!