OneWater (ONEW)

Boat and marine products retailer OneWater Marine (NASDAQ:ONEW) reported Q2 CY2025 results topping the market’s revenue expectations, with sales up 1.9% year on year to $552.9 million. The company’s full-year revenue guidance of $1.83 billion at the midpoint came in 3.2% above analysts’ estimates. Its non-GAAP profit of $0.79 per share was 25.3% 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).

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $1.79 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 16.5% annualized revenue growth over the last six years (we compare to 2019 to normalize for COVID-19 impacts) was impressive as it opened new stores and expanded its reach.

This quarter, OneWater reported modest year-on-year revenue growth of 1.9% but beat Wall Street’s estimates by 4%.

Looking ahead, sell-side analysts expect revenue to grow 2.1% over the next 12 months, a deceleration versus the last six years. This projection doesn't excite us and suggests its products will see some demand headwinds.

Number of Stores

A retailer’s store count often determines how much revenue it can generate.

Over the last two years, OneWater opened new stores quickly, averaging 2.3% annual growth. This was faster than the broader consumer retail sector.

When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.

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

Same-Store Sales

A company's store base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales provides a deeper understanding of this issue because it measures organic growth at brick-and-mortar shops for at least a year.

OneWater’s demand has been shrinking over the last two years as its same-store sales have averaged 1.1% annual declines. This performance is concerning - it shows OneWater artificially boosts its revenue by building new stores. We’d like to see a company’s same-store sales rise before it takes on the costly, capital-intensive endeavor of expanding its store base.

In the latest quarter, OneWater’s same-store sales rose 2% year on year. This growth was a well-appreciated turnaround from its historical levels, showing the business is regaining momentum.

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 24.2% gross margin over the last two years. That means OneWater paid its suppliers a lot of money ($75.77 for every $100 in revenue) to run its business.

In Q2, OneWater produced a 23.3% gross profit margin, down 1.2 percentage points year on year and missing analysts’ estimates by 4.4%. OneWater’s full-year margin has also been trending down over the past 12 months, decreasing by 1.8 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 an important measure of profitability for retailers as it accounts for all expenses necessary to run a store, including wages, inventory, rent, advertising, and other administrative costs.

OneWater was roughly breakeven when averaging the last two years of quarterly operating profits, one of the worst outcomes in the consumer retail sector. 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 5.8 percentage points over the last year, as its sales growth gave it operating leverage.

This quarter, OneWater generated an operating margin profit margin of 5.5%, down 1.9 percentage points year on year. Since OneWater’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, and administrative overhead increased.

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 133%, or 18.5% annually, over the last five 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 Q2, OneWater reported adjusted EPS at $0.79, down from $1.05 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 $0.02 to grow 7,002%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

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? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

OneWater historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 13.8%, somewhat low compared to the best consumer retail companies that consistently pump out 25%+.

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 $554.4 million of debt exceeds the $70.15 million of cash on its balance sheet. Furthermore, its 8× net-debt-to-EBITDA ratio (based on its EBITDA of $60.46 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 enjoyed seeing OneWater beat analysts’ revenue expectations this quarter. We were also glad its full-year revenue guidance exceeded Wall Street’s estimates. On the other hand, its EBITDA missed and its gross margin fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 1.8% to $14.31 immediately following the results.

Updated: November 8, 2025 at 9:27 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 OneWater.

OneWater isn’t a terrible business, but it doesn’t pass our quality test. Although its revenue growth was impressive over the last six years, it’s expected to deteriorate over the next 12 months and its operating margins reveal poor profitability compared to other retailers. 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 13.2x. Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. 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 $17.50 on the company (compared to the current share price of $15.03).

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.