Since August 2024, MarineMax has been in a holding pattern, floating around $28.74. The stock also fell short of the S&P 500’s 12.2% gain during that period.
Is now the time to buy MarineMax, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
We're swiping left on MarineMax for now. Here are three reasons why there are better opportunities than HZO and a stock we'd rather own.
Why Is MarineMax Not Exciting?
Appropriately headquartered in Clearwater, Florida, MarineMax (NYSE:HZO) sells boats, yachts, and other marine products.
1. Shrinking Same-Store Sales Indicate Waning Demand
Same-store sales is an industry measure of whether revenue is growing at existing stores, and it is driven by customer visits (often called traffic) and the average spending per customer (ticket).
MarineMax’s demand has been shrinking over the last two years as its same-store sales have averaged 1.1% annual declines.
2. Cash Burn Ignites Concerns
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
MarineMax’s demanding reinvestments have drained its resources over the last two years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 7.8%, meaning it lit $7.76 of cash on fire for every $100 in revenue.
3. Short Cash Runway Exposes Shareholders to Potential Dilution
As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.
MarineMax burned through $148.1 million of cash over the last year, and its $1.32 billion of debt exceeds the $145 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.
Unless the MarineMax’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.
We remain cautious of MarineMax until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.
Final Judgment
MarineMax’s business quality ultimately falls short of our standards. With its shares lagging the market recently, the stock trades at 10.6× forward price-to-earnings (or $28.74 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - you can find better investment opportunities elsewhere. We’d suggest looking at one of our top digital advertising picks.
Stocks We Would Buy Instead of MarineMax
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