Winnebago (WGO)

RV Manufacturer Winnebago (NYSE:WGO) announced better-than-expected revenue in Q3 CY2025, with sales up 7.8% year on year to $777.3 million. On the other hand, the company’s full-year revenue guidance of $2.85 billion at the midpoint came in 0.5% below analysts’ estimates. Its non-GAAP profit of $0.71 per share was 33.5% above analysts’ consensus estimates.

Company Overview

Created to provide high-quality, affordable RVs to the post-war American family, Winnebago (NYSE:WGO) is a manufacturer of recreational vehicles, providing a range of motorhomes, travel trailers, and fifth-wheel products for outdoor and adventure lifestyles.

Much capital investment and technical know-how are needed to manufacture functional, safe, and aesthetically pleasing automobiles for the mass market. Barriers to entry are therefore high, and auto manufacturers with economies of scale can boast strong economic moats. However, this doesn’t insulate them from new entrants, as electric vehicles (EVs) have entered the market and are upending it. This has forced established manufacturers to not only contend with emerging EV-first competitors but also decide how much they want to invest in these disruptive technologies, which will likely cannibalize their legacy offerings.

Winnebago's competitors in the recreational vehicle market include THOR Industries (NYSE:THO), Forest River (a subsidiary of Berkshire Hathaway NYSE:BKH.B), and REV Group (NYSE:REVG).

A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, Winnebago’s sales grew at a sluggish 3.5% compounded annual growth rate over the last five years. This was below our standard for the industrials sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Winnebago’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 10.5% annually.

We can better understand the company’s revenue dynamics by analyzing its most important segments, Motorhomes and Towables, which are 46.5% and 39.4% of revenue. Over the last two years, Winnebago’s Motorhomes revenue (homes on wheels) averaged 12.7% year-on-year declines while its Towables revenue (non-motorized vehicles) averaged 7.2% declines.

This quarter, Winnebago reported year-on-year revenue growth of 7.8%, and its $777.3 million of revenue exceeded Wall Street’s estimates by 6.3%.

Looking ahead, sell-side analysts expect revenue to grow 3.6% over the next 12 months. Although this projection suggests its newer products and services will catalyze better top-line performance, it is still below average for the sector.

Cost of sales for an industrials business is usually comprised of the direct labor, raw materials, and supplies needed to offer a product or service. These costs can be impacted by inflation and supply chain dynamics.

Winnebago has bad unit economics for an industrials business, signaling it operates in a competitive market. This is also because it’s an automobile manufacturer.

Automobile manufacturers have structurally lower profitability as they often break even on the initial sale of vehicles and instead make money on parts and servicing, which come many years later - this explains why new entrants such as Rivian, Lucid, and Nikola have negative gross margins. As you can see below, these dynamics culminated in an average 16.6% gross margin for Winnebago over the last five years.

Winnebago’s gross profit margin came in at 12.8% this quarter, in line with the same quarter last year. On a wider time horizon, Winnebago’s full-year margin has been trending down over the past 12 months, decreasing by 1.5 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and manufacturing expenses).

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Winnebago has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 8.1%, higher than the broader industrials sector.

Looking at the trend in its profitability, Winnebago’s operating margin decreased by 9.2 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Winnebago generated an operating margin profit margin of 2.6%, up 5.1 percentage points year on year. The increase was solid, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Winnebago, its EPS declined by 8.3% annually over the last five years while its revenue grew by 3.5%. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

We can take a deeper look into Winnebago’s earnings to better understand the drivers of its performance. As we mentioned earlier, Winnebago’s operating margin expanded this quarter but declined by 9.2 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Winnebago, its two-year annual EPS declines of 53.2% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q3, Winnebago reported adjusted EPS of $0.71, up from $0.28 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Winnebago’s full-year EPS of $1.68 to grow 39.5%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Winnebago has shown mediocre cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 5.1%, subpar for an industrials business.

Taking a step back, we can see that Winnebago’s margin dropped by 2.1 percentage points during that time. This along with its unexciting margin put the company in a tough spot, and shareholders are likely hoping it can reverse course. If the trend continues, it could signal it’s in the middle of an investment cycle.

Winnebago’s free cash flow clocked in at $171.2 million in Q3, equivalent to a 22% margin. This result was good as its margin was 17.9 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends carry greater meaning.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Winnebago hasn’t been the highest-quality company lately because of its poor revenue and EPS performance, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 15.4%, impressive for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Winnebago’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Winnebago reported $174 million of cash and $579.8 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $121.9 million of EBITDA over the last 12 months, we view Winnebago’s 3.3× net-debt-to-EBITDA ratio as safe. We also see its $12.7 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Winnebago beat analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. And while its and its full-year revenue guidance fell slightly short of Wall Street’s estimates, full-year EPS guidance beat. Zooming out, we think this quarter was quite good. The stock traded up 12.7% to $35.60 immediately after reporting.

Updated: December 4, 2025 at 10:24 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Winnebago.

Winnebago doesn’t pass our quality test. For starters, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its declining EPS over the last five years makes it a less attractive asset to the public markets.

Winnebago’s P/E ratio based on the next 12 months is 15.8x. This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $44.17 on the company (compared to the current share price of $38.03).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.