CAVCO INDUSTRIES INC (NASDAQ:CVCO) – A Strong Contender for GARP Investors

CAVCO INDUSTRIES INC (NASDAQ:CVCO) emerged from our Peter Lynch-inspired stock screen as a potential candidate for long-term investors seeking growth at a reasonable price. The company, a manufacturer of factory-built homes, demonstrates solid financial health, profitability, and sustainable growth—key traits favored by GARP (Growth at a Reasonable Price) strategies.

Why CVCO Fits the Peter Lynch Criteria

• Earnings Growth: CVCO has delivered a strong 5-year average EPS growth of 21.77%, comfortably within Lynch’s preferred range of 15% to 30%. This suggests consistent and manageable expansion.
• Reasonable Valuation: With a PEG ratio (past 5 years) of 0.97, the stock appears fairly valued relative to its growth, meeting Lynch’s requirement of PEG ≤ 1.
• Strong Financial Health: The company maintains a minimal debt-to-equity ratio of 0.01, well below Lynch’s threshold of 0.6, indicating a conservative capital structure.
• Liquidity & Profitability: A current ratio of 3.00 reflects ample short-term liquidity, while an ROE of 16.07% underscores efficient use of shareholder capital.

Fundamental Strengths

Our fundamental analysis report highlights CVCO’s robust profitability and financial stability. Key takeaways include:

• High ROIC (14.55%) and ROA (12.16%), placing it ahead of most industry peers.
• Improving margins, with operating margins expanding in recent years.
• Low bankruptcy risk, supported by an Altman-Z score of 10.05.

While the stock trades at a premium relative to some industry peers (P/E of 21.09), its growth trajectory and financial strength may justify the valuation.

Final Thoughts

For investors aligned with Peter Lynch’s philosophy—focusing on understandable businesses with steady growth and sound finances—CVCO presents a compelling case. Its combination of earnings growth, conservative leverage, and strong returns makes it worth further research.

Our Peter Lynch Strategy screener lists more stocks meeting these criteria and is updated regularly.

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.