Long Idea, Thor Industries (THO: $86/share), up 30% since publish date, has been downgraded from Attractive to Neutral. This downgrade comes after we analyzed THO’s 2016 10-K on September 27, 2016.

Thor still exhibits many of the fundamental strengths we highlighted in our original Long Idea report, such as rising economic earnings and improving return on invested capital (ROIC). However, the recent $576 million acquisition of Jayco creates a drag on free cash flow (FCF), which fell from $3 million in 2015 to -$289 million in 2016 and knocked its FCF yield down to -6%. At the same time, the 30% increase in the stock since June 2016 makes its valuation less attractive.

The risk/reward profile on this stock no longer exhibits the significant upside potential we initially highlighted in June. We hope investors were able to participate in the 30% rise in the stock since we highlighted it to them.

This article originally published here on October 4, 2016.

Disclosure: David Trainer, Kyle Martone, and Kyle Guske II receive no compensation to write about any specific stock, sector, style, or theme.

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