OneWater Marine (NASDAQ:ONEW) is an underfollowed, microcap stock that is on an impressive growth trajectory. The company is one of the leading recreational boat retailers in the U.S. with 63 stores comprising of 21 dealer groups in 11 states. Stores are located in attractive markets with market-leading positions by sales volume in 12 out of the 17 markets in which they operate.
ONEW was formed through a combination of two businesses: Singleton Assets and Legendary Marine and IPO'd in February 2020 at a price of $12 per share. Management has "skin in the game" with insiders owning approximately 15.7% of the common stock and 32.8% of the voting power. ONEW is led by founder Austin Singleton, who is a second-generation boat dealer with 32 years of industry experience.
Since the combination of Singleton Assets and Legendary Marine, the company has completed 17 acquisitions, adding 40 stores to its portfolio. However, despite its size, ONEW only accounts for 2% of total industry sales. The boat dealership market remains very fragmented, with approximately 4,300 stores nationwide.
A fragmented market creates an opportunity for ONEW to keep growing through acquisitions while growing ancillary revenue that should be less cyclical and higher margin (for example providing maintenance services).
From a valuation point of view, the company is trading at 5.7x forward earnings with analysts expecting $3.35 in EPS for fiscal '21. For comparison, close competitor MarineMax (HZO) trades at 8.4x forward earnings. At a multiple in line with its competitor, ONEW should be trading at $26 per share or 37% higher from recent levels.
Low valuation multiples could be an indicator of the market's skepticism towards sustainable sales levels, after all, the industry is having a record-breaking year. How the industry performs in the coming years would depend upon the long-term effects of the pandemic on the
