What happened
Week to date, shares of Fox Factory Holding(NASDAQ: FOXF) were down 8.7% through Thursday's close, according to data provided by S&P Global Market Intelligence.
The maker of off-road vehicle products reported another strong quarter of growth this week, but the market's worry about the direction of interest rates and the bear market for stocks has weighed on Fox Factory's share price this year. Year to date, the stock has fallen 52%, but it could be a compelling buy on top of continued growth in the business.
So what
Bear markets tend to pull everything down no matter how well a business may continue to perform. That seems to be the case here. Fox Factory is a leading manufacturer of products that improve the performance of off-road bikes and vehicles. Through the first nine months of 2022, sales increased 25% year over year, with revenue hitting a quarterly record in the third quarter.
Of course, it's not so much customer demand but profitability that Wall Street is concerned about in this environment. But here, Fox Factory is holding up relatively well, too. Its gross margin fell less than 1 percentage point this year, as the company has managed to absorb higher supply chain costs. Year to date, adjusted earnings per share were up nearly 18% year over year.
Now what
Management said it continues to monitor the health of demand trends, but from a long-term perspective, the stock appears to be a great value right now. Management sees long-term sales growth ranging from mid to high single digits as the company continues to explore new and existing markets, such as snow, trucks and SUVs, and commercial and military products.
The stock's modest price-to-earnings ratio of 15 based on this year's earnings estimate looks like a good deal ahead of these opportunities.
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John Ballard has no position in any of the stocks mentioned. The Motley Fool recommends Fox Factory Holding. The Motley Fool has a disclosure policy.
