A Member of Pat McKeough’s Inner Circle recently asked for his advice on MarineMax, a company that sells recreational boats and related marine products and services across the United States.
Pat likes the firm’s demonstrated growth through strategic acquisitions and technological innovation as it creates an ecosystem of marine-related services far beyond boat sales. However, Pat cautions that the stock is trading cheaply due to justified concern over its high debt and doubts it can maintain its previously high growth rate.
MarineMax Inc. (Symbol HZO on New York; www.marinemax.com), operates as a recreational boat and yacht retailer, and a services firm for yacht owners in the U.S.
The company sells new and used recreational boats, including pleasure and fishing boats, mega- and small yachts, sport cruisers, ski boats, jet boats, and other recreational boats.
It offers marine parts and accessories comprising marine electronics; dock and anchoring products that include boat fenders, lines, and anchors; boat covers; trailer parts; water sport accessories, which comprise tubes, lines, wakeboards, and skis; engine parts; steering and control systems; corrosion control products and service products; high-performance accessories, including propellers and instruments; and a line of boating accessories such as life jackets, inflatables, and water sports equipment.
MarineMax also provides novelty items such as shirts, caps, and licence plates; marine engines and equipment; maintenance, repair, and slip and storage accommodation services; and boat or yacht brokerage services.
The company has more than 120 locations worldwide, including 75 dealerships and 65 marinas.
Its businesses include IGY Marinas, which operates luxury marinas in yachting and sport fishing destinations around the world; Fraser Yachts Group and Northrop & Johnson, two leading luxury yacht brokerage and services firms; Cruisers Yachts, one of the world’s premier manufacturers of sport yachts and motor yachts; and Intrepid Powerboats, a premier manufacturer of powerboats.
Meanwhile, MarineMax also offers financing and insurance services as well as digital technology products to connect boaters to a network of marinas, dealers, and marine professionals.
In addition, it operates MarineMax Vacations in Tortola, British Virgin Islands, which offers luxury boating adventures to vacationers.
MarineMax has also made 15 acquisitions since April 2019.
Inner Circle: How MarineMax’s ecosystem and finances took shape
On January 5, 2023, the company announced completion of its takeover of Boatzon, a retail technology platform dedicated to the marine industry. The platform aims to let boat buyers shop, pay for, and insure their purchases online. The acquisition provides MarineMax with what it believes is the digital platform to compete in the evolving world of boat retail.
On September 25, 2023, the company announced that its subsidiary Fraser Yachts had agreed to acquire a controlling interest in Atalanta Golden Yachts, a leading charter management agency based in Athens, Greece.
It is, in fact, one of the top charter management agencies in Greece. Founded in 2006, it arranges luxury charters for European and Caribbean customers.
While terms were not disclosed, the acquisition is expected to add to MarineMax’s earnings in the first full year. The acquisition solidifies MarineMax’s position within the luxury yacht business.
The company’s revenue rose steadily in the last five years from 2019 to 2023 (fiscal years end September 30). Revenue increased 93.6%, from $1.24 billion in 2019 to $2.39 billion in 2023. In 2024 (fiscal year ended September 30, 2024), revenue rose 1.5%, to $2.43 billion.
Earnings climbed 211.8% over the same period, from $37.3 million, or $1.63 a share, in 2019 to $116.8 million, or $5.21 a share, in 2023. In 2024 (fiscal year ended September 30, 2024), earnings fell 58.0%, to $49.1 million, or $2.13 a share.
Meanwhile, in the three months ended September 30, 2024, MarineMax’s revenue fell 5.3% to $563.1 million from $594.6 million a year earlier. Revenue was lower primarily reflecting lower boat sales due to the closure of boat and yacht insurance markets as Hurricane Helene approached Florida.
Excluding one-time items, the company earned $5.5 million, or $0.24 a share. That was down 64.9% from $15.8 million, or $0.69. Higher costs, including interest on debt, hurt profits.
MarineMax’s total debt is now $1.1 billion, or a high 1.6 times its $701.6 million market cap.. The company took on significant debt when, in October 2022, it completed the acquisition of Island Global Yachting LLC (IGY Marinas) for $480.0 million. MarineMax also holds cash of $224.3 million.
Growth by acquisition adds risk to MarineMax’s shares, as does the company’s high debt. At the same time, its business is sensitive to economic slowdowns and falling consumer confidence. Extreme weather events such as the recent Hurricane Helene pose additional risk.
The company is a market leader, and the stock trades at 13.6 times the forecast 2025 earnings of $2.33 a share. However, that low P/E ratio reflects investor fears that it will fail to maintain its growth.
Recommendation in Pat’s Inner Circle: MarineMax is okay to hold, but only for aggressive investors.
