Is Polaris Industries (PII) Headed for a Breakdown?

Polaris Industries Inc. (PII) designs and manufactures off-road vehicles, including all-terrain vehicles and side-by-side vehicles for recreational and utility purposes, snowmobiles, small vehicles, and on-road vehicles, including motorcycles and low-emission vehicles, along with the related replacement parts, garments, and accessories…

Polaris Industries Inc. (PII) has been benefiting from strong demand for recreational vehicles and a shortage of inventory in the industry. This led to a strong second quarter where earnings rose 107.7% year over year and sales jumped 40.2% year over year.

PII has a solid balance sheet with only $53 million in short term debt and a current ratio of 1.2. EBITDA has grown an average of 21.4% per year over the past three years. However, earnings are expected to fall 29.1% year over year in the current quarter.

The stock appears undervalued based on both its trailing and forward P/Es of 11.89 and 13.93. This has led to a Value Grade of A in our POWR Ratings system. The stock showed bullish momentum from November to April, but performance has been mixed since then, as shown in the chart below.

Take a look at the 6-month chart of PII below with added notations…

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