LCII

LCII is a cyclical auto/RV components maker priced like the market doubts the recovery, even as the numbers show it underway. FY2025 revenue rose 10.2% to $4.12B, net income jumped 31.8% to $188M, and diluted EPS climbed 35.2% to $7.57 — yet the stock trades at just 13.2x earnings and 0.6x sales. The MD&A pinpoints the engine: OEM travel-trailer/fifth-wheel sales grew to $1.708B from $1.515B and OEM operating margin expanded from 3.7% to 5.8%, lifting total operating profit 28.3% to $280M. Capital returns reinforce the cheapness — $114M dividends (a ~4.7% yield, a sustainable ~61% of net income) plus $129M of buybacks that shrank the share count 5%.

The key caveat is that this is a recovery, not secular growth. The revenue/net-income history is overtly cyclical: $5.21B/$395M in 2022, collapsing to $3.78B/$64M in 2023, now clawing back to $4.12B/$188M. So today's $7.57 EPS sits well below the prior peak — meaning earnings still have room — but also that a downturn could halve them again. Management's diversification thesis (56% of sales now outside the North American RV OEM market, counter-seasonal aftermarket revenue) is the structural offset, and it is showing partial results. But it is incomplete: the higher-margin Aftermarket Segment actually went backwards in 2025, with operating margin slipping from 12.6% to 10.3% and segment profit falling to $95.8M from $111.2M — so the entire earnings recovery is riding on the more cyclical OEM side.