There are a lot of factors that a smart investor should consider when thinking about using a stock for a long-term investing opportunity. A company'southward cardinal force and relative value are 2 of the master elements that I pay attention to, but along with those I besides gene in technical factors similar the stock'south long-term trend and its current momentum. I as well think that if you desire to requite yourself the best chances of success, you also demand to consider wide market place conditions, including where the economy – global as well equally national – and its generally cyclical nature impact the stock you're thinking about.

This is an opinion that is a little bit at odds with traditional, "pure" value investing principles. The male parent of value investing, Benjamin Graham, asserted that if a stock could exist described as being a strong value, that was the just question that needed to be answered, and you should go ahead and brand the investment anyway. In the broadest sense, I concur with that principle, but the problem that I think most investors – myself included – run into in trying to use it successfully is their own emotion.

The truth is that when you invest your hard-earned coin, your emotions will always exist involved – no matter how much you've studied, how long yous've invested, or how thorough your analysis has been. And while finding a stock at a deep disbelieve more often than not does mean that in the long-term, the stock should increase in toll, the truth is that it doesn't mean the stock isn't going to go downwards more than information technology may have at the moment. In fact, if the stock has already been dropping, and is at historical lows, that broader trend may proceed the stock going downward for a while longer. It's hard for most of us to sit down and hold onto a stock while it keeps dropping and keep saying, "Information technology'due south a good value. I've got to be patient." That'southward why I like to consider technical factors as well as broader marketplace weather too.

In the context of the economy, nearly indications are that the U.Southward. economic system continues to be salubrious right now; employment numbers and personal income for the most office continue to show healthy growth, even every bit trade concerns are commencement to weigh on corporate operations and earnings considerations. A lot of analysts however point to that economic strength as a chief reason to stay bullish nearly the stock market place'southward potential for the foreseeable future. There may be some truth to that; but I also see some increasing signs of risk. Equally the growth of the U.S. economy extends itself across the decade mark since the end of the Great Recession – a period of economic health that is previously unheard of, I'll add together – I think that there is an increasing likelihood that it will reverse. The Fed has already cut interest rates once in the final couple of months and appears poised to practise information technology once again this calendar month – despite the fact that the economy is growing. That's one reason I recollect risk is increasing; another is the ongoing trade war between the U.Due south. and China. There are signs that increasing tariffs are increasing article costs, which means that the negative result of tariffs are rippling into business operations that don't include the relationship between those two countries.

Winnebago Industries Inc. (WGO) is a company that at first blush might seem like an interesting way to accept advantage of a healthy U.S. economy, and that could act as a shield for your money confronting tariff chance exposure. Their products are sold almost exclusively in the U.S. and Canada, with no presence in Asia. Nonetheless, the increase of article costs I just mentioned – coming from duties on steel and aluminum, and other tariffs targeting the auto industry specifically – are challenges that even management has acknowledged the visitor is having to deal with. Those are counters against the thought that when income growth is healthy, consumer are more likely to buy products similar recreational vehicles. Permit's accept a look at WGO's numbers and permit you decide if this is a stock that you lot should pay more attention to right now.

Key and Value Profile

Winnebago Industries, Inc. is a manufacturer of a portfolio of recreation vehicles (RV) and marine products used primarily in leisure travel and outdoor recreation activities. The Visitor produces its motorhome units in manufacturing facilities in Iowa and Oregon; its towable units in Indiana; and its marine units in Florida. Its segments include Motorhome, Towable and Corporate / All Other. Its Motorhome segment is comprised of products that include a motorized chassis, likewise every bit other related manufactured products and services. Its Towable segment is comprised of products which are not motorized and are by and large towed by another vehicle, as well equally other related manufactured products and services. The Corporate / All Other category includes the Winnebago specialty vehicles and Chris-Arts and crafts marine operating segments as well as expenses related to certain corporate administration expenses for the oversight of the enterprise. WGO has a current market cap of $46.8 billion.

Earnings and Sales Growth: Over the concluding twelve months, earnings grew by virtually 12%, while sales declined well-nigh -half-dozen%. In the last quarter, earnings improved by ninety% while Revenues increased about 22%. WGO's Cyberspace Income versus Acquirement is adequate, and strengthening,, having increased from 5.5% in the last twelve months to 6.9% in the last quarter.

Gratis Cash Period: WGO's Gratuitous Cash Flow is small, at $63.one million. That translates to a Free Greenbacks Flow Yield of 6.47%. A business is the fact that this number has declined since the beginning of 2018, when Free Cash Menstruation was around $110 million.

Debt to Equity: WGO has a debt/disinterestedness ratio of .42, which is generally bourgeois, merely doesn't necessary imply strength in this instance. WGO's rest sheet shows $4.18 one thousand thousand in cash and liquid assets versus $253.07 meg in long-term debt. Their operating profile suggests that operating margins are more than acceptable to service their debt; withal their minimal greenbacks position suggests that liquidity is a business concern.

Dividend: WGO pays a dividend of $.44 per share. At the stock's current toll, that translates to an annual yield of nearly one.43%. It should be noted their dividend payout is simply a little over 10% of their almanac earnings per share, which is very conservative.

Toll/Book Ratio: there are a lot of ways to measure how much a stock should exist worth; simply one of the simplest methods that I similar uses the stock's Book Value, which for WGO is $19.07 per share. At the stock'due south electric current price, that translates to a Toll/Book Ratio of 1.61, while their historical boilerplate is two.6; that puts the stock's "fair" value at about $49.50 per share. That's 61% away from the stock'south electric current toll, which which is very attractive. The stock'due south Price/Cash Menstruation supports the idea that WGO is deeply discounted correct now, since it is trading about 39% below its historical Cost/Greenbacks Flow ratio, which puts its forecasted long-term fair value cost at about $43 per share.

Technical Contour

Here's a wait at the stock's latest technical nautical chart.

Current Price Activity/Trends and Pivots: The chart above shows the concluding ii years of cost activity for WGO. The ruby diagonal line traces the stock's downward trend throughout 2018. Information technology besides provides the base line for the Fibonacci retracement lines shown on the right side of the nautical chart. While the stock is up on a year-to-appointment basis, it has besides dropped sharply over the terminal month from a high at around $41 to its electric current price, nearly -25% below that level. Information technology as well appears to take cleaved below support at effectually $32 in simply the last week or so, which means that level should now human action as immediate resistance. The stock'south next likely support level is around $29. Its next support level, wherever it shows, will mark a lower low against the stock'southward upward tendency since January of this year, which is an indication the stock'due south tendency could be moving back to the surly side. A drop below $29 could signal fifty-fifty more weakness, to the $25 or $26 range, or possibly to the stock's multiyear low around $xx. A useful bullish signal would come up from a push button above the resistance shown by the 38.2% Fibonacci retracement line at around $35; that would mark a continuation of the stock's upward tendency, with well-nigh-term resistance from that point next coming around the stock's high of the year near $forty.

Near-term Keys: I think the odds for WGO right now are on the bearish side correct now. Signs are that consumer purchases of recreational and luxury vehicles aren't robust right now, and that seems to be at to the lowest degree part of the reason for the stock'southward reject since the beginning of August. If the stock reverses and manages to push button above $35, you could think most placing a bullish trade by buying the stock or working with call options, with a about-term target at around $39 to $40. The greater hazard is that the stock volition go along dropping however, so in the near term a better indicate would come up from a drop below $29. In that example, consider shorting the stock or working with put options, with an eye on the $25 range as a near-term go out target. While the stock does offer an interesting value right now, I recall the stock's bearish risk right at present means that the smarter approach is to await until in that location are signs some of the stock's fundamentals – in item, Free Cash Period and cash – are increasing. By the fourth dimension that happens, the stock's value proposition is probable to exist even stronger than it is now.