REV GROUP INC (NYSE:REVG) – A GARP Stock Worth Considering

REV GROUP INC (NYSE:REVG) stands out as a potential candidate for long-term investors seeking growth at a reasonable price (GARP). The company, which designs and manufactures specialty and recreational vehicles, meets several key criteria from Peter Lynch’s investment strategy, including strong earnings growth, reasonable valuation, and solid financial health.

Why REVG Fits the GARP Approach

• Earnings Growth: REVG has delivered an impressive 5-year average EPS growth of 29.36%, comfortably within Lynch’s preferred range of 15-30%. This suggests sustainable expansion rather than overheated growth.
• Attractive Valuation: With a PEG ratio of 0.80 (below Lynch’s threshold of 1), the stock appears reasonably priced relative to its earnings growth.
• Strong Profitability: The company’s return on equity (ROE) of 27.08% far exceeds the 15% minimum Lynch favored, indicating efficient use of shareholder capital.
• Healthy Balance Sheet: A debt-to-equity ratio of 0.36 reflects conservative financing, aligning with Lynch’s preference for low debt. The current ratio of 1.66 also signals sufficient liquidity to cover short-term obligations.

Fundamental Strengths and Considerations

REVG’s fundamental analysis highlights a mixed but generally positive picture:

• Profitability: The company scores well on ROE and ROIC, outperforming most peers in the machinery industry. Margins have improved in recent years, though gross margins remain below industry averages.
• Financial Health: While solvency metrics are strong (Altman-Z score of 4.55), liquidity ratios like the quick ratio (0.53) are weaker, suggesting reliance on inventory to meet short-term needs.
• Valuation: The stock trades at a P/E of 23.55, roughly in line with the S&P 500 but slightly cheaper than industry peers based on forward earnings estimates.

For a deeper dive, review the full fundamental report on REVG.

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Disclaimer

This is not investing advice. The observations here are based on data available at the time of writing. Always conduct your own research before making investment decisions.