Cavco Indus (NASDAQ:CVCO) Stock, Quote.Headers.trade-ideas

Cavco Indus

Cavco Industries Inc designs and produces factory-built homes under the Cavco Homes, Fleetwood Homes, and Palm Harbor Homes brands. It also produces modular homes, park model homes, and vacation cabins, as well as commercial structures, among others. The company operates principally in two segments: Factory-built housing, which includes wholesale and retail systems-built housing operations, and the Financial services segment, which includes manufactured housing consumer finance and insurance. Cavco receives a majority of its revenue from the Factory-built housing segment.

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Strong earnings and revenue guidance from Nvidia sparked a tech stock surge, with Nasdaq 100 and S&amp;P 500 hitting record highs.

Nvidia&#39;s 10% Leap Propels Tech Indexes To Record Highs; Blue Chips, Small Caps Slip: What&#39;s Driving Markets Thursday?

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With Quiver Quantitative’s recent institutional holdings data, we can see that hedge funds and asset managers have been increasing their holdings in Cavco Industries Inc. (NASDAQ: CVCO). Firms such as T.

Cavco Industries Inc.: A Compounding Small Cap Stock

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Analyst Ratings

Wedbush analyst Jay McCanless reiterated an Outperform rating on the shares of Cavco Industries, Inc. (NASDAQ: CVCO) and lowered the price target from $390 to $380.

Cavco Industries To See Stabilizing Backlog And Consistent Retail Demand, Says Analyst

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Shares of household durable companies are trading higher following strong New Home Sales economic data for July. Also, the sector may be moving in sympathy with the market after Fed Chair Powell offered an optimistic U.S. economic outlook and indicated future rate cuts.

Craig-Hallum analyst Greg Palm maintains Cavco Indus (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/CVCO#NASDAQ">CVCO</a>) with a Buy and raises the price target from $382 to $422.

Craig-Hallum Maintains Buy on Cavco Indus, Raises Price Target to $422

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Shares of companies within the broader consumer discretionary sector are trading lower amid overall market weakness following weak US data.

Wedbush analyst Jay McCanless reiterates Cavco Indus (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/CVCO#NASDAQ">CVCO</a>) with a Outperform and maintains $425 price target.

Wedbush Reiterates Outperform on Cavco Indus, Maintains $425 Price Target

Cavco Indus (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/CVCO#NASDAQ">CVCO</a>) reported quarterly earnings of $4.11 per share which missed the analyst consensus estimate of $4.70 by 12.55 percent. This is a 22.31 percent decrease over earnings of $5.29 per share from the same period last year. The company reported quarterly sales of $477.599 million which beat the analyst consensus estimate of $462.321 million by 3.30 percent. This is a 0.36 percent increase over sales of $475.875 million the same period last year.

Earnings

Cavco Indus Q1 2025 GAAP EPS $4.11 Misses $4.70 Estimate, Sales $477.599M Beat $462.321M Estimate

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Shares of household durable stocks are trading higher after store sales of building material and garden supplies rose 1.4% in June. Also, strength may be due to trader optimism that the Fed will cut rates.

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Shares of homebuilders, construction and household durables stocks are trading higher following a softer-than-expected May CPI Report. Also, the Fed left rates unchanged.

Cavco (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/CVCO#NASDAQ">CVCO</a>) reported quarterly earnings of $4.03 per share which missed the analyst consensus estimate of $4.51 by 10.64 percent. The company reported quarterly sales of $420.118 million which missed the analyst consensus estimate of $470.114 million by 10.63 percent. This is a 11.81 percent decrease over sales of $476.380 million the same period last year.

Cavco Industries Q4 2024 GAAP EPS $4.03 Misses $4.51 Estimate, Sales $420.118M Miss $470.114M Estimate

Stronger-than-expected quarterly results and upbeat revenue guidance from Nvidia Corp. sparked a renewed surge in tech stocks on Thursday, as traders continue to exhibit bullish sentiment toward the<a href="https://www.benzinga.com/quote/NVDA/news"> rapidly expanding AI industry.</a>
The chipmaker giant&#8217;s stock soared over 10% to $1,051 per share during midday trading in New York, boosting its market value by an astonishing $277 billion in a single session.
The tech-heavy Nasdaq 100 reached 18,907 points in early trading, setting a new all-time high. Similarly, the S&amp;P 500 hit a record high of 5,341 points before paring gains as other sectors lagged behind tech.
The semiconductor sector clearly outperformed, with the VanEck Semiconductor ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SMH#NYSE">SMH</a>) rising 3%. Besides Nvidia, Synopsys Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SNPS#NASDAQ">SNPS</a>), ASML Holding N.V. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/ASML#NASDAQ">ASML</a>), and Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TSM#NYSE">TSM</a>) saw significant gains, up 4.2%, 3.4%, and 2.6%, respectively.
However, broader market sentiment turned more cautious as S&amp;P Global reported that although U.S. private sector activity grew at the fastest pace in nearly two years, input prices accelerated in <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/05/38989066/us-business-activity-resurges-in-may-largest-rise-in-2-years-but-return-to-feds-2-t">May, reigniting inflation concerns.</a>
Treasury yields climbed higher, with the rate-sensitive 2-year yield rising 6 basis points to 4.97%, nearing its highest close since May 1. Long-term yields also increased, with the 30-year yield up 5 basis points to 4.60%, pushing the iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) down 0.8%.
Blue-chip stocks fell 0.7%, on track for their worst session since late April. Small-cap stocks also declined, down 0.5%, extending losses following a 0.8% drop on Wednesday.
Gold prices dropped 1.4% to $2,344 per ounce, following a 1.7% decline on Wednesday.
<h3 class="wp-block-heading">Thursday&#8217;s Performance In Major US Indices, ETFs</h3>
<figure class="wp-block-table is-style-stripes"> 
<table>
<tbody>
<tr>
<td>Major Indices</td>
<td>Price</td>
<td>1-day %chg</td>
</tr>
<tr>
<td>Nasdaq 100</td>
<td>18,847.70</td>
<td>0.8%</td>
</tr>
<tr>
<td>S&amp;P 500</td>
<td>5,321.33</td>
<td>0.3%</td>
</tr>
<tr>
<td>Russell 2000</td>
<td>2,072.66</td>
<td>-0.4%</td>
</tr>
<tr>
<td>Dow Jones</td>
<td>39,410.72</td>
<td>-0.7%</td>
</tr>
</tbody>
</table>
<figcaption class="wp-element-caption">Updated at 12:33 p.m. EDT</figcaption></figure>
The SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) was 0.3% higher to $531.23, the SPDR Dow Jones Industrial Average (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/DIA#NYSE">DIA</a>) fell 0.6% to $394.24 and the tech-heavy Invesco QQQ Trust (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>) was up 0.8% to $459.10, according to <a href="https://pro.benzinga.com/dashboard">Benzinga Pro data</a>. 
Among sectors, the Technology Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLK#NYSE">XLK</a>) outperformed, up by 0.5%. The Utilities Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLU#NYSE">XLU</a>) lagged behind, dropping 0.8%. 
<h3 class="wp-block-heading">Thursday&#8217;s Stock Movers</h3>
<ul>
<li>e.l.f. Beauty Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ELF#NYSE">ELF</a>) rocketed 21% after smashing the Street&#8217;s estimates last quarter and following a bullish note from Bank of America Securities.</li>
<li>Other companies reacting to earnings were Snowflake Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SNOW#NYSE">SNOW</a>) down 2%, V.F. Corp. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VFC#NYSE">VFC</a>) down 3.5%, EnerSys (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ENS#NYSE">ENS</a>) up 11%, BBB Foods Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TBBB#NYSE">TBBB</a>) up 15%, Medtronic plc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/MDT#NYSE">MDT</a>) down 3.6%, Ralph Lauren Corp. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/RL#NYSE">RL</a>) up 4%, Hamilton Lane Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/HLNE#NASDAQ">HLNE</a>) up 4.9% and CSW Industrial Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/CSWI#NASDAQ">CSWI</a>) up 4.4%. </li>
<li>Live Nation Entertainment (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/LYV#NYSE">LYV</a>) fell nearly 7%, making it the worst performer in the S&amp;P 500. The decline followed a Department of Justice lawsuit against its subsidiary, Ticketmaster, arguing that the company should be dismantled due to its monopoly in ticketing and concert promotion.</li>
<li>The Boeing Company (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BA#NYSE">BA</a>) tanked nearly 6% after the company&#8217;s CFO announced that Q2 deliveries won&#8217;t recover from the previous quarter. </li>
<li>Companies slated to report their earnings after the close are Intuit Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/INTU#NASDAQ">INTU</a>), Workday Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/WDAY#NASDAQ">WDAY</a>), Ross Stores Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/ROST#NASDAQ">ROST</a>), StepStone Group Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/STEP#NASDAQ">STEP</a>), PagSeguro Digital Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/PAGS#NYSE">PAGS</a>) and Cavco Industries Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/CVCO#NASDAQ">CVCO</a>). </li>
</ul>
Read now: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/05/38985220/goldman-sachs-expects-nvidia-to-sustain-competitive-lead-raises-price-forecast-to-1">Goldman Sachs Expects Nvidia To &#8216;Sustain Competitive Lead,&#8217; Raises Price Forecast To $1,200 Following Stellar Q1 Earnings</a>
Image generated using artificial intelligence via Midjourney.

Nvidia's 10% Leap Propels Tech Indexes To Record Highs; Blue Chips, Small Caps Slip: What's Driving Markets Thursday?

Wedbush analyst Jay McCanless maintains Cavco Indus (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/CVCO#NASDAQ">CVCO</a>) with a Outperform and raises the price target from $380 to $425.

Wedbush Maintains Outperform on Cavco Indus, Raises Price Target to $425

Shares of homebuilders and household durables stocks are trading lower following hotter-than-expected March inflation data, which could cause rate cut uncertainty.

Cavco Industries Reveals Ratification Of Collective Bargaining Agreement At Emlenton, Pennsylvania Plant; Says Employees Will Be Back To Work Tomorrow

Cavco Industries&nbsp;collective bargaining agreement between Pennwest TCC and The International Association of Machinists, which represents employees at the Company&#39;s Emlenton, PA manufacturing plant, has expired. As a result, the Union employees elected to go on strike. We are eager to get back to the negotiating table and continue bargaining in good faith toward a contract that recognizes the Company&#39;s commitment to our employees. Negotiations are expected to resume early next week.

Reported Earlier, Cavco Industries Faces Strike As Collective Bargaining Agreement Expires At Emlenton Plan

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Shares of several companies in the broader consumer discretionary sector are trading lower after January CPI data showed a greater-than-expected rise in inflation.

Cavco Indus (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/CVCO#NASDAQ">CVCO</a>) reported its Q3 earnings results on Thursday, February 1, 2024 at 04:05 PM.
Here's what investors need to know about the announcement.
<h3>Earnings</h3>
Cavco Indus reported in-line EPS of $4.27 versus an estimate of $4.27.
Revenue was down $53.83 million from the same period last year.
<h3>Past Earnings Performance</h3>
Last quarter the company missed on EPS by $0.51 which was followed by a 5.65% increase in the share price the next day.
Here's a look at Cavco Indus's past performance:

<table>
<thead>
<tr>
<th>Quarter</th>
<th>Q2 2024</th>
<th>Q1 2024</th>
<th>Q4 2023</th>
<th>Q3 2023</th>
</tr>
</thead>
<tbody>
<tr>
<td>EPS Estimate</td>
<td>5.27</td>
<td>6.76</td>
<td>5.10</td>
<td>5.79</td>
</tr>
<tr>
<td>EPS Actual</td>
<td>4.76</td>
<td>5.29</td>
<td>5.39</td>
<td>6.66</td>
</tr>
<tr>
<td>Revenue Estimate</td>
<td>477.59M</td>
<td>552.90M</td>
<td>484.92M</td>
<td>525.91M</td>
</tr>
<tr>
<td>Revenue Actual</td>
<td>452.03M</td>
<td>475.88M</td>
<td>476.38M</td>
<td>500.60M</td>
</tr>
</tbody>
</table>

To track all earnings releases for Cavco Indus <a href="https://www.benzinga.com/quote/CVCO/earnings">visit their earnings calendar here.</a> 
This article was generated by Benzinga's automated content engine and reviewed by an editor.

Recap: Cavco Indus Q3 Earnings

Cavco Indus (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/CVCO#NASDAQ">CVCO</a>) reported quarterly earnings of $4.27 per share which met the analyst consensus estimate. This is a 35.89 percent decrease over earnings of $6.66 per share from the same period last year. The company reported quarterly sales of $446.77 million which beat the analyst consensus estimate of $425.88 million by 4.90 percent. This is a 10.75 percent decrease over sales of $500.60 million the same period last year.

Cavco Indus Q3 EPS $4.27, Inline, Sales $446.77M Beat $425.88M Estimate

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Earnings Scheduled For February 1, 2024

Cavco Indus (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/CVCO#NASDAQ">CVCO</a>) is set to give its latest quarterly earnings report on Thursday, 2024-02-01. Here's what investors need to know before the announcement.
Analysts estimate that Cavco Indus will report an earnings per share (EPS) of $4.27. 
Cavco Indus bulls will hope to hear the company announce they've not only beaten that estimate, but also to provide positive guidance, or forecasted growth, for the next quarter.
New investors should note that it is sometimes not an earnings beat or miss that most affects the price of a stock, but the guidance (or forecast).
<h3>Past Earnings Performance</h3>
Last quarter the company missed EPS by $0.51, which was followed by a 5.65% increase in the share price the next day.
Here's a look at Cavco Indus's past performance and the resulting price change:

<table>
<thead>
<tr>
<th>Quarter</th>
<th>Q2 2024</th>
<th>Q1 2024</th>
<th>Q4 2023</th>
<th>Q3 2023</th>
</tr>
</thead>
<tbody>
<tr>
<td>EPS Estimate</td>
<td>5.27</td>
<td>6.76</td>
<td>5.10</td>
<td>5.79</td>
</tr>
<tr>
<td>EPS Actual</td>
<td>4.76</td>
<td>5.29</td>
<td>5.39</td>
<td>6.66</td>
</tr>
<tr>
<td>Price Change %</td>
<td>5.65%</td>
<td>4.04%</td>
<td>-6.09%</td>
<td>-1.47%</td>
</tr>
</tbody>
</table>

<img src="https://www.benzinga.com/files/images/story/2024/1706716909_0.png" alt="eps graph" />
<h3>Stock Performance</h3>
Shares of Cavco Indus were trading at $333.9 as of January 30. Over the last 52-week period, shares are up 20.49%. Given that these returns are generally positive, long-term shareholders are likely bullish going into this earnings release. 
<a href="https://www.benzinga.com/quote/CVCO/earnings">To track all earnings releases for Cavco Indus visit their earnings calendar on our site.</a>
This article was generated by Benzinga's automated content engine and reviewed by an editor.

Earnings Preview: Cavco Indus

With&nbsp;<a href="https://www.quiverquant.com/">Quiver Quantitative</a>&rsquo;s recent&nbsp;institutional holdings data, we can see that hedge funds and asset managers have been increasing their holdings in Cavco Industries Inc. (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/cvco#NASDAQ">CVCO</a>). Firms such as T. Rowe Price, Millennium Management, and Pacer Advisors have all recently added to their CVCO positions. Most notably, Pacer Advisors increased shares held by 66.64% (as filed on 9/30), bringing their total CVCO holdings to 122,917 shares worth nearly $37.4 million dollars at current market prices. With this in mind, we took a closer look at some of the reasons why many investors may be bullish on Cavco Industries Inc.
In November, Cavco Industries Inc. reported earnings for the second quarter of fiscal year 2024. This earnings report was a little shaky, due to unfavorable market conditions. Net revenue was $452 million dollars in the second quarter of FY24, compared to $577 million dollars in the second quarter of FY23 (21.7% decrease). Additionally, backlogs were $170 million at the end of the quarter, down $7 million from $177 million three months prior. Despite this, nearly $47 million dollars was returned to shareholders via share repurchases, showcasing the management&rsquo;s strong capital allocation priorities that put shareholders first. While this short-term hiccup in earnings isn&rsquo;t positive, management still remains committed to long-term business objectives, such as deepening distribution partnerships, developing innovative products and finance solutions, and improving the customer experience. When commenting on the quarter, CEO Bill Boor mentioned &ldquo;Prospective homeowners have gotten no relief from the impact of rising interest rates and the affordable housing crisis is intensifying.&rdquo; This further showcases the secular tailwinds positively affecting the manufactured and modular home construction market that Cavco Industries&rsquo; operates within. With these earnings results in mind, we took a closer look at some of the reasons why many investors are bullish on Cavco Industries Inc.
Cavco Industries Inc., headquartered in Phoenix, Arizona, is a leading manufacturer of factory-built homes in the United States. Founded on June 30, 2003, it stands as the successor corporation to previous Cavco entities that have been operational since 1965. The company specializes in designing and producing a wide range of factory-built homes, including manufactured homes, park model RVs, vacation cabins, and factory-built commercial structures. These homes are marketed under various brand names, such as Cavco, Fleetwood, Palm Harbor, and Solitaire, to name a few. Cavco operates 29 homebuilding production lines within the U.S. and two in Mexico, distributing its products through a network of independent and Company-owned retailers across 48 states and Canada, including 64 U.S. retail stores, 50 of which are in Texas. In addition to home manufacturing, Cavco&#39;s finance subsidiary, CountryPlace Acceptance Corp., provides mortgage services and is approved by major national mortgage associations. Its insurance subsidiary, Standard Casualty Company, focuses on property and casualty insurance for manufactured homes, primarily serving the southwestern U.S. The company&#39;s recent acquisition of Solitaire Homes has expanded its manufacturing capabilities into Mexico and bolstered its market presence, especially in the Southwest.
The manufactured housing industry, where Cavco Industries operates, offers affordable alternatives to traditional housing and appeals to a diverse demographic, notably those with incomes under $40,000, individuals aged 55 and older, and young adults, including Millennials. In 2022, manufactured homes accounted for about 14.9% of all new single-family home sales in the U.S., with a significant increase in shipments since 2009. The industry benefits from positive secular trends like the growing U.S. adult population, expected to expand by 8.3 million between 2023 and 2028, and the increasing interest from first-time homebuyers and older adults seeking energy-efficient, low-maintenance homes in planned communities. These factors, along with innovative production and engineering, position the industry for growth, despite its sensitivity to economic conditions such as employment levels, consumer confidence, and financing availability. The manufactured housing industry is highly competitive at both wholesale and retail levels, with management acknowledging that competitive factors are largely based on product features, price, depth of distribution, terms of retail customer financing, and service and quality reputation, among others. Cavco Industries competes well in these categories, despite the strong competition in the industry.
Cavco Industries&rsquo; management is solid, and their capital allocation priorities do a great job of aligning shareholder and management interests. Cavco Industries hasn&rsquo;t paid out a cash dividend on the business&rsquo; common stock in two years, and there doesn&rsquo;t seem to be any evidence of dividends returning in the near future. While some investors may not be fond of this, we believe that this is a great thing for a business like Cavco. Compounding businesses should always prioritize reinvestments back into the business (if they are able to generate a high enough return on capital), and then prioritize buybacks / dividends later. Since Cavco is currently trading at a low valuation based on our proprietary models (which we will touch on later), it also makes sense for them to repurchase shares, which they have done in the past and are still currently doing. In May of 2022, Cavco Industries&rsquo; Board of Directors approved a $100 million share repurchase program to be used to purchase its common stock. As we can see, management likes to repurchase shares to return value to shareholders, and they are very efficient at it. Buying back the business&rsquo; shares at cheap valuations greatly benefits shareholders, especially considering Cavco&rsquo;s extremely low float (around 8.3 million shares outstanding).
Looking at management incentives and NEO compensation structure, we can see that management is incentivized well with a compensation structure that helps align shareholder and management interests. The components of the compensation structure include a base salary, annual short-term incentive cash compensation, and long-term equity compensation. The annual short-term incentive cash compensation is based on company and individual objective-based performance. The long-term equity compensation, on the other hand, is based on predetermined metrics like market share and relative total shareholder return. Not only does this equity incentive do an impeccable job of aligning management and shareholder interests (the relative total shareholder return metric ensures that both management and shareholders are on the same page when it comes to share price growth), it also does a great job of retaining executive talent over the long term, as executives build equity stakes in the business.
Cavco Industries is a very high quality business that is able to generate profit efficiently. The business currently operates at a LTM ROE of 20% and a LTM ROIC of 21.4%. With Cavco Industries operating at a WACC of 10.2%, the business currently operates at a ROIC to WACC ratio of around 2.1x, showcasing the business&rsquo; ability to generate returns on capital (which includes equity AND debt capital) far greater than the business&rsquo; weighted average cost of capital. Essentially, the business is earning more on each dollar invested than it costs to borrow or attract that dollar, showcasing efficient capital use and strong value creation for the business. Businesses that are able to generate high returns on capital are considered to be compounders, businesses that are able to rapidly compound earnings and intrinsic value over the long-term, handsomely rewarding shareholders.
Analyzing Cavco Industries&rsquo; income statement, we can see some stellar sustained growth in revenue, gross profit, and earnings within the last decade. Since 2014, the business has grown revenue at a CAGR of 14.9%, with gross profit growing at a CAGR of 18.1% in the same time period, showcasing strong top-line growth on the income statement. The high growth in gross profit can be attributed to expanding gross margins. In 2014, Cavco operated at gross margins of 19% of revenue, compared to today where the business operates at LTM gross margins of 23.9% of revenue. In terms of earnings, Cavco has grown EBITDA, EBIT (operating income), and EPS at CAGRs of 26.1%, 27.2%, and 30%, respectively. The growth in EBIT can be attributed to expanding EBIT margins (5% EBIT margin in 2014 compared to 13.8% LTM EBIT margin) and the fact that EBIT growth outpaces SG&amp;A expenses in the long run (since 2014, SG&amp;A has grown at a CAGR of 12.3%, compared to 27.2% EBIT growth in that same time frame, suggesting further EBIT margin expansion). Additionally, the growth in EPS can largely be attributed to share buybacks, along with high growth in net income (which we will touch on later). Since 2021, Cavco has decreased shares outstanding by nearly 10%.
Looking at Cavco Industries&rsquo; balance sheet, we can see that the business operates in solid financial health. The business currently holds around $391 million dollars worth of cash and equivalents and short term investments on the balance sheet, paired with total debt of $38.32 million dollars. Cavco Industries operated at net debt of -$353 million dollars, meaning that the business has $353 million dollars of excess cash on the balance sheet when compared to the business&rsquo; debt obligations. With so much excess cash on the balance sheet, Cavco industries has plenty of runway to reinvest that cash back into the business at favorable rates of return, allowing the business to continue to compound its intrinsic value and earnings over the long run. Additionally, this cash could be used to repurchase shares or to offer / increase a dividend. No matter what management decides to do, shareholders will be rewarded handsomely.
Analyzing Cavco Industries&rsquo; cash flow statement, we can see some stellar sustained growth in net income and free cash flow within the last decade, showcasing the business&rsquo; increased operational efficiency. Since 2014, Cavco Industries&rsquo; has grown net income at a CAGR of 31%, with free cash flow growing at a CAGR of 16.9% in that same time period. This growth in free cash flow can largely be attributed to incrementally expanding free cash flow margins. In 2014, the business operated at a free cash flow margin of 8.3% of revenue, compared to today where the business operates at a free cash flow margin of around 10% of revenue. If Cavco Industries&rsquo; is able to continue to incrementally expand free cash flow margins, it will act as a catalyst for future free cash flow growth, allowing the business to generate more and more cash that can be used for reinvestments back into the business, share repurchases, and/or cash dividends for shareholders.
After conducting a reverse discounted cash flow analysis, we can see that current share prices imply a -1% growth rate (CAGR) in free cash flow over the next ten years, using a discount rate of 10.2% (Cavco&rsquo;s WACC) and a perpetuity growth rate of 3% (largely in line with US GDP growth). Cavco Industries&rsquo; is a wonderful business with no debt, piles of cash on the balance sheet, and strong top-line and bottom-line growth within the last decade. We believe that this valuation is insanely cheap, especially given the business&rsquo; last ten year growth rate in free cash flow (16.9%). While past performance is not indicative of future results, the business was able to expand free cash flow margins and rapidly expand free cash flow generation within the last decade, and we see no signs of this slowing down, especially to the level that the market expects. Using a conservative estimate of a 5% free cash flow CAGR over the next ten years, we get a share price of $442.26, implying a 45.48% return. This valuation is based completely on our proprietary models, and we encourage all investors to do their own due diligence when looking into Cavco Industries.
Keep an eye out for&nbsp;CVCO stock&rsquo;s latest news, data, and more with&nbsp;<a href="https://www.quiverquant.com/">Quiver Quantitative</a>.
This article is from an external contributor. It does not represent Benzinga&#39;s reporting and has not been edited for content or accuracy.

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