Analysis of Polaris

Company: Polaris

ISIN US7310681025 | WKN 893819

Business: An American, mainly, off-rode, vehicle producer. They have a wide range of products and those are: Side x Side Vehicles, All-Terrain Vehicles, Victory Motorcycles, Indian Motorcycle, Snowmobiles, GEM Electric Motorcars, Parts, Apparel & Accessories, Polaris Defense and finally Generators.

Active: Main focus is the US and Canada. They have distribution of their products on practically every continent.

P/E: 12.4


This company was analysed due to a request from Rafy over twitter.

The P/E for Polaris is pretty great with 12.4 and the P/B is not that good with 6.6 which then in the end gives us a clear no go from Graham. Their earnings to sales look good with 10% and the ROE is chocking with 53%. The book to debt ratio is low but not extremely low with 0.7.
In the latest five years they have had an amazing high revenue growth rate of 17.6% which then gives us a motivated P/E of 30 to 40 which means that Polaris is today undervalued on the market.
They are trying to stay ahead and for that reason they spend 33% of their earnings towards that goal which I find very reasonable.
They also pay an almost acceptable dividend of 2.3% which correspond to less than 30% of their earnings so hopefully they can keep that up.
Comment: In 2015 they have dropped significantly in value. They have gone out and said that they will not reach what they forecast and are more looking at something similar to 2 to 3 % growth due to warm weather. This is a huge difference from the previous growth of 17.6%. So they will not live up to expectations plus they indicate that their nice growth rate is stopping. Additionally they are concerned that their research tax deduction will disappear. If it does then the earnings will drop even more.

Conclusion: Graham says no to Polaris and so do I at this moment. It looks like a very nice contrarian situation but I have never even heard of the brand and that I do not like. The P/E is great and the ROE is excellent but that is about it. For an american company they also carry more debt than usual.

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