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Here's Why Polaris Belongs In Your Portfolio

Aug. 11, 2015 3:00 PM ETPolaris Inc. (PII)
William Bias profile picture
William Bias


  • Demand for Polaris’s products served as the biggest catalyst for top line gains over the past five years.
  • Polaris possesses an employee stock ownership plan with employees collectively owning 6% of the company.
  • Polaris exercises financial prudence in expense control, debt and capital expenditures.

It's important for long-term investors to develop a guide for doing their investment research. Over the years I have developed questions to guide me in my thinking when researching the publicly traded universe. Right now let's talk about Polaris Industries (NYSE: NYSE:PII).

1.) What does the company do?

When you buy shares in a company you effectively become part owner of that company. Therefore, it's important for an investor to understand what a company sells. Polaris essentially sells a variety of small motorized vehicles such as ATVs, motorcycles, snowmobiles, and off-road utility vehicles. Some of the names you may recognize include Slingshot, Victory, Indian and RZR.

2.) What do the fundamentals look like?

Investors should also look for companies that grow revenue and free cash flow over the long-term, retaining some of that cash for reinvestment back into the business and for economic hard times. Excellent revenue and free cash flow growth serve as catalysts for superior long-term gains. Polaris possesses excellent fundamentals. The company expanded revenue, net income and free cash flow 157%, 241% and 45%, respectively, over the past five years (see chart below).

PII Revenue (<a href=

PII Revenue (NYSE:TTM) data by YCharts

It's safe to say that volume served as the greatest contributor to Polaris's top line gains, followed by price increases and product mixes. Good volume increases point to healthy demand for a product. Prudent cost controls contributed to gains in net income and free cash flow. Operating margins improved consecutively since 2008. Moreover, Polaris isn't afraid to scale back on capital expenditures during lean times.

So far this year, Polaris continues to perform well. Its year-to-date revenue and net income increased 13% and 7%, respectively, year-over-year. However, its year-to-date free cash flow declined 96% year-over-year, stemming largely from the timing of payments on accounts payable.

Polaris possesses an

This article was written by

William Bias profile picture
I have been analyzing stocks since 1992 and a freelance writer since 2012.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (4)

Thanks William,
Nearly bought PII today but will wait a bit longer.
Appreciate the report.
William Bias profile picture
Thanks for reading flyingmariner.

stu_s profile picture
Thanks for this piece, William. If I did my numbers right, inventory turns fell to 4.75X in 2Q15 from 6X in 2Q14, a big drop. In combination with your analysis, I come to the opposite conclusion as you.
William Bias profile picture
Hi stu_s

Thanks for reading. Always good to hear from you.

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