CAVCO INDUSTRIES INC (NASDAQ:CVCO) - A Strong Candidate for GARP Investors

CAVCO INDUSTRIES INC (NASDAQ:CVCO) stands out as a potential fit for investors seeking long-term growth at a reasonable price (GARP). The company, a manufacturer of factory-built homes and modular structures, meets several key criteria outlined in Peter Lynch’s investment strategy.

Why CVCO Fits the GARP Approach

• Earnings Growth: CVCO has delivered strong earnings growth, with a 5-year average EPS growth of 21.77%, comfortably within Lynch’s preferred range of 15-30%. This suggests sustainable expansion rather than overheated performance.
• Attractive Valuation: The stock’s PEG ratio (5-year) of 0.90 indicates it is reasonably priced relative to its growth, aligning with Lynch’s preference for PEG ratios below 1.
• Healthy Balance Sheet: With a debt-to-equity ratio of just 0.01, CVCO maintains a conservative capital structure, well below Lynch’s suggested threshold of 0.6.
• Strong Profitability: The company’s return on equity (ROE) of 16.07% exceeds Lynch’s 15% benchmark, reflecting efficient use of shareholder capital.
• Liquidity Strength: A current ratio of 3.00 ensures CVCO can comfortably meet short-term obligations, reinforcing financial stability.

Fundamental Highlights

Our fundamental analysis rates CVCO 7 out of 10, with standout scores in financial health (10/10) and profitability (7/10). Key takeaways:

• Profit Margins: An 8.49% net profit margin outperforms 70% of industry peers, supported by improving operating margins.
• Low Debt Risk: An Altman-Z score of 9.62 signals minimal bankruptcy risk, while a quick ratio of 2.17 highlights robust liquidity.
• Valuation Context: While CVCO’s P/E of 19.67 is slightly above industry averages, its PEG ratio and growth prospects justify the premium.

For a deeper dive, review the full fundamental report here.

Our Peter Lynch Strategy screener lists more stocks matching these criteria and is updated daily.

Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should always conduct your own analysis before making investment decisions.