THOR Industries has gotten torched over the last six months - since September 2024, its stock price has dropped 30.9% to a new 52-week low of $75.94 per share. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.

Is now the time to buy THOR Industries, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Even though the stock has become cheaper, we're cautious about THOR Industries. Here are three reasons why we avoid THO and a stock we'd rather own.

Why Do We Think THOR Industries Will Underperform?

Created through the acquisition and merger of various RV manufacturers, THOR Industries manufactures and sells a range of recreational vehicles, including motorhomes and travel trailers, catering to consumers seeking the freedom and comfort of the RV lifestyle.

1. Long-Term Revenue Growth Disappoints

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, THOR Industries’s sales grew at a weak 1.1% compounded annual growth rate over the last five years. This was below our standards.THOR Industries Quarterly Revenue

2. EPS Trending Down

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Sadly for THOR Industries, its EPS declined by 3.5% annually over the last five years while its revenue grew by 1.1%. This tells us the company became less profitable on a per-share basis as it expanded.THOR Industries Trailing 12-Month EPS (Non-GAAP)

3. New Investments Fail to Bear Fruit as ROIC Declines

A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, THOR Industries’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.THOR Industries Trailing 12-Month Return On Invested Capital

Final Judgment

We cheer for all companies making their customers lives easier, but in the case of THOR Industries, we’ll be cheering from the sidelines. After the recent drawdown, the stock trades at 13.4× forward price-to-earnings (or $75.94 per share). While this valuation is reasonable, we don’t see a big opportunity at the moment. There are more exciting stocks to buy at the moment. We’d recommend looking at an all-weather company that owns household favorite Taco Bell.

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