$236.00
$557.00
bear $236.00
base $452.00
bull $557.00
margin of safety $230.00
market price* $521.96
Cavco Industries builds factory-made homes - HUD-code manufactured homes, modular homes and park-model RVs - under brands including Cavco, Fleetwood Homes, Palm Harbor, Commodore and, since September 29, 2025, American Homestar. It sold about 20,800 homes in fiscal 2026 (year ended March 28, 2026): 16,071 through independent dealers in 48 states and Canada, and 4,771 through 92 company-owned retail stores, 57 of them in Texas. A smaller financial services arm, CountryPlace Mortgage and Standard Casualty, writes home loans and property insurance mostly for buyers of the company's own homes and finances dealer inventory. Manufactured housing is the cheapest unsubsidized path to home ownership in the U.S., which gives it a durable niche, but demand swings with consumer credit, interest rates and affordability, and the industry has a history of deep downturns. Earnings level. We measure owner earnings as the cash the business produces after the capital spending needed to keep its plants running, after stock compensation, and with year-to-year swings in inventory, receivables, payables and the loan books removed. Over fiscal 2017-2026 this ran from about $3 to $24 per share: $18.84 in 2022, $23.88 in 2023, $16.86 in 2024, $20.82 in 2025 and $23.24 in 2026. The company is a different, much larger business since the Commodore (2021) and Solitaire (2022) acquisitions and the pandemic-era repricing of homes, so we use fiscal 2022-2026 as the window; it contains a boom year (2023) and a real correction (2024, when cash earnings fell about 32%). The median year is about $175 million. We add roughly $10 million for the half-year of American Homestar not yet in the figures (bought for $172.8 million in cash and adding $90.5 million of revenue in its first six months) and remove about $5 million of interest earned on surplus cash, because that cash is counted separately below. That gives a normal level of about $180 million, or about $23 per share on the current 7.78 million diluted shares. Two accounting judgements matter: gains on loan sales and investment marks are excluded, which is slightly conservative, and capital spending above what revenue growth explains is treated as maintenance, which charges the heavy plant investment of fiscal 2023 and 2026 against earnings. A $10 million trade-name write-off in fiscal 2025 was added back as a non-cash charge; amortization of acquired intangibles is only about $2 million a year, so wasting intangibles are not material here. Recent trend. Owner-earnings growth in fiscal 2026 was about 7.5%. For the first year of the base case we assume about $175 million, below both the normal level and that growth rate, because the first quarter of fiscal 2027 showed net income down 18% to $42.3 million and factory-built gross margin down to 20.8% from 22.6% on higher input costs. Offsetting that, homes sold rose 4.4%, the order backlog was $298 million against $195 million a year earlier, and plants ran at about 75% of capacity. Base case (about $452 per share). Year one at about $175 million, then about 2% a year through year ten, credited only because the company has repeatedly passed higher material and labor costs into selling prices (higher prices added $102.9 million of revenue in fiscal 2026). No credit is given for market growth, share gains, new plants or future acquisitions; those acquisitions and buybacks are paid out of the same cash we are valuing. After year ten earnings are held flat at about $209 million, not grown, because the evidence supports persistence - the company and the industry have sold low-cost homes through every cycle since the 1950s - but not further expansion. The operating business is worth about $3.34 billion; the company has no borrowings (cash interest paid was $0.3 million in fiscal 2026) and holds about $243 million of cash, of which we treat about $173 million as surplus after operating needs, giving about $3.52 billion for shareholders. Bear case (about $236 per share). One full manufactured-housing downturn of the kind seen in 2006-2010, when industry shipments fell from about 117,000 homes to about 50,000 and Cavco itself lost money. Year one at $160 million as the current margin squeeze continues; then $60 million, a loss of about $10 million including roughly $30 million of credit losses on dealer floor-plan and consumer loans, and a slow recovery ($30, $60, $80, $100 million) to a permanently lower $115 million from year eight on, reflecting the decade-long weak recovery that followed the last collapse. The business is worth about $1.66 billion, it owes nothing, and with surplus cash shareholders hold about $1.84 billion. With no debt, the company survives this case without dilution. Bull case (about $557 per share). The backlog converts, American Homestar contributes a full year, and idle capacity at existing plants fills: year one at about $190 million, rising about 4% a year to about $270 million by year ten, then flat. The business is worth about $4.16 billion, owes nothing, and shareholders hold about $4.34 billion. Margin-of-safety price ($230). We are fairly confident in the earnings level: five years of figures between $145 million and $214 million, with the low point in a genuine correction. The worst plausible outcome is a repeat of 2006-2010 with loan losses in the finance arm; with no borrowings, a broad dealer base (no dealer above 10% of sales) and about $243 million of cash, the company would survive it intact, though earnings could be near zero for two or three years. The things we are most likely to be wrong about are how much of the 2022-2026 profitability came from unusually strong pricing, and whether input-cost pressure is lasting; if normal earnings are really the fiscal 2024 trough of about $145 million with no growth, the shares are worth roughly $330. The company pays no dividend; it returns cash through buybacks ($160 million in fiscal 2026, $30 million in the first quarter of fiscal 2027). A price of $230 corresponds to about $23 a share of normal cash earnings - a yield near 10% - plus about $22 a share of surplus cash. Over an assumed four-year holding period, the base case per-share value plus four years of retained cash earnings is above twice that price, and even the trough-earnings outcome implies close to a 15% annual return, while the bear case is still covered. Above about $230 the 20% target depends on the base case or better arriving within a few years, which a cyclical business cannot promise. Changes since the previous analysis: the earlier figures were prepared on a different basis and are not directly comparable. The business developments since then are mixed: the American Homestar purchase is now in the results, margins weakened in the latest quarter, and the order backlog is markedly higher.