Brunswick has been treading water for the past six months, recording a small loss of 1.6% while holding steady at $73.59. The stock also fell short of the S&P 500’s 10.4% gain during that period.

Is there a buying opportunity in Brunswick, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.

We don't have much confidence in Brunswick. Here are three reasons why there are better opportunities than BC and a stock we'd rather own.

Why Do We Think Brunswick Will Underperform?

Formerly known as Brunswick-Balke-Collender Company, Brunswick (NYSE: BC) is a designer and manufacturer of recreational marine products, including boats, engines, and marine parts.

1. Long-Term Revenue Growth Disappoints

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Brunswick’s sales grew at a sluggish 5.6% compounded annual growth rate over the last five years. This fell short of our benchmark for the consumer discretionary sector.

2. New Investments Fail to Bear Fruit as ROIC Declines

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We typically prefer to invest in companies with high returns because it means they have viable business models, but the trend in a company’s ROIC is often what surprises the market and moves the stock price. Unfortunately, Brunswick’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

3. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Brunswick’s revenue to rise by 1.1%. While this projection indicates its newer products and services will fuel better top-line performance, it is still below average for the sector.

Final Judgment

We cheer for all companies serving everyday consumers, but in the case of Brunswick, we’ll be cheering from the sidelines. With its shares trailing the market in recent months, the stock trades at 12.1× forward price-to-earnings (or $73.59 per share). This valuation multiple is fair, but we don’t have much confidence in the company. There are superior stocks to buy right now. We’d suggest looking at The Trade Desk, the nucleus of digital advertising.

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