Initiation of Research Coverage: Fox Factory Holding Corp.

Tuesday, September 3, 2013

William Blair & Company initiated research coverage of Fox Factory Holding Corp. (FOXF $18.39), a rapidly growing innovator, manufacturer, and marketer of high-performance suspension products—designed to enhance ride dynamics—for mountain bike and powered vehicle end-markets, with an Outperform rating and Aggressive Growth company profile.

Analyst Jon Andersen estimated the company would generate adjusted EBITDA $48.3 million in 2013, $58.0 million in 2014, and $73.5 million in 2015.

“Fox is a structurally attractive business,” Andersen said, “and is well positioned with a broad portfolio of high-performance suspension products; a strategic brand that is highly valued by OEMs, dealers, and consumers; a successful record of innovation; and unique go-to-market capabilities. Fox’s logo is prominently displayed and is a key differentiator for most of the products that use its suspension systems, making it a valuable brand for OEMs and dealers. Fox supports its premium brand positioning through its expertise in suspension engineering and design. Since the company’s inception, it has been first to market with numerous innovative new product offerings. In addition, Fox has been able to leverage its expertise to address a broader range of end-markets and a variety of vehicles. For example, success in the premium segment of the all-terrain vehicle category preceded the widespread adoption of Fox suspension technology in the recreational side-by-side market—now the company’s second-largest product category by sales.”

Andersen continued, “We believe the company has multiple pathways for growth, including existing category growth; increased market share; expansion in adjacent price segments, product categories, and geographic markets; and price/mix. Fox’s core end-markets—suspended mountain bikes and recreational side-by-side vehicles—should continue to grow as innovation encourages greater category participation and prompts trade-up among existing users. And there is significant margin expansion potential from the transition of mountain bike product manufacturing to Taiwan, cost-saving programs, and scale. “

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Outperform (Buy): 62%
Market Perform (Hold): 33%
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Outperform (Buy): 10%
Market Perform (Hold): 1%
Underperform (Sell): 0%

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