OneWater (ONEW)

Boat and marine products retailer OneWater Marine (NASDAQ:ONEW) fell short of the market’s revenue expectations in Q1 CY2025, with sales flat year on year at $483.5 million. The company’s full-year revenue guidance of $1.75 billion at the midpoint came in 3.8% below analysts’ estimates. Its non-GAAP profit of $0.13 per share was 61.2% below analysts’ consensus estimates.

Company Overview

A public company since early 2020, OneWater Marine (NASDAQ:ONEW) sells boats, yachts, and other marine products.

Retailers that sell boats and marine products sell products, sure, but they also sell an image and lifestyle to an often wealthier customer. Unlike a car–which many use daily to get to/from work and to run personal and family errands–a boat or yacht is certainly a discretionary, luxury, nice-to-have purchase. While there is online competition, especially for research and discovery, the boat and yacht market is still very brick-and-mortar based given the magnitude of the purchase and the logistical costs associated with moving these products over long distances.

Competitors offering recreational marine products include MarineMax (NYSE:HZO), Yamaha Motor Co. (TSE:7272), and Brunswick Corp (NYSE:BC).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $1.78 billion in revenue over the past 12 months, OneWater is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers. On the bright side, it can grow faster because it has more white space to build new stores.

As you can see below, OneWater’s 17.8% annualized revenue growth over the last six years (we compare to 2019 to normalize for COVID-19 impacts) was excellent despite not opening many new stores.

This quarter, OneWater missed Wall Street’s estimates and reported a rather uninspiring 1% year-on-year revenue decline, generating $483.5 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 4% over the next 12 months, a deceleration versus the last six years. Still, this projection is above the sector average and implies the market is baking in some success for its newer products.

Number of Stores

The number of stores a retailer operates is a critical driver of how quickly company-level sales can grow.

Over the last two years, OneWater has kept its store count flat while other consumer retail businesses have opted for growth.

When a retailer keeps its store footprint steady, it usually means demand is stable and it’s focusing on operational efficiency to increase profitability.

Note that OneWater reports its store count intermittently, so some data points are missing in the chart below.

Same-Store Sales

The change in a company's store base only tells one side of the story. The other is the performance of its existing locations and e-commerce sales, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales is an industry measure of whether revenue is growing at those existing stores and is driven by customer visits (often called traffic) and the average spending per customer (ticket).

OneWater’s demand has been shrinking over the last two years as its same-store sales have averaged 1.4% annual declines. This performance isn’t ideal, and we’d be concerned if OneWater starts opening new stores to artificially boost revenue growth.

In the latest quarter, OneWater’s same-store sales fell by 2% year on year. This performance was more or less in line with its historical levels.

Gross profit margins are an important measure of a retailer’s pricing power, product differentiation, and negotiating leverage.

OneWater has bad unit economics for a retailer, signaling it operates in a competitive market and lacks pricing power because its inventory is sold in many places. As you can see below, it averaged a 24.8% gross margin over the last two years. Said differently, OneWater had to pay a chunky $75.20 to its suppliers for every $100 in revenue.

OneWater produced a 22.8% gross profit margin in Q1, down 1.8 percentage points year on year and missing analysts’ estimates by 2%. OneWater’s full-year margin has also been trending down over the past 12 months, decreasing by 2.1 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to discount products and higher input costs (such as labor and freight expenses to transport goods).

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

OneWater was roughly breakeven when averaging the last two years of quarterly operating profits, inadequate for a consumer retail business. This result isn’t too surprising given its low gross margin as a starting point.

On the plus side, OneWater’s operating margin rose by 5.3 percentage points over the last year, as its sales growth gave it immense operating leverage.

This quarter, OneWater generated an operating profit margin of 3.4%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

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.

OneWater’s full-year EPS dropped significantly over the last four years. In a mature sector such as consumer retail, we tend to steer our readers away from companies with falling EPS because it could imply changing secular trends and preferences. If the tide turns unexpectedly, OneWater’s low margin of safety could leave its stock price susceptible to large downswings.

In Q1, OneWater reported EPS at $0.13, down from $0.67 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects OneWater’s full-year EPS of $0.28 to grow 560%.

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.

OneWater broke even from a free cash flow perspective over the last two years, giving the company limited opportunities to return capital to shareholders.

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).

OneWater’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 17.4%, slightly better than typical consumer retail business.

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.

OneWater’s $566.1 million of debt exceeds the $67.46 million of cash on its balance sheet. Furthermore, its 7× net-debt-to-EBITDA ratio (based on its EBITDA of $66.82 million over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. OneWater could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope OneWater can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

We struggled to find many positives in these results. Quarterly results missed across the board, and the company lowered full-year guidance. The stock traded down 18% to $12.30 immediately following the results.

Updated: May 22, 2025 at 10:25 PM EDT

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 OneWater.

OneWater’s business quality ultimately falls short of our standards. Although its revenue growth was impressive over the last six years, it’s expected to deteriorate over the next 12 months and its declining EPS over the last four years makes it a less attractive asset to the public markets. And while the company’s projected EPS for the next year implies the company’s fundamentals will improve, the downside is its gross margins make it more challenging to reach positive operating profits compared to other consumer retail businesses.

OneWater’s P/E ratio based on the next 12 months is 7.6x. While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $16.75 on the company (compared to the current share price of $14.35).

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.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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