FTG has an acquisitive business model, with disciplined capital allocation. The company targets to gradually transition the business model to high-margin aftermarket content over time through acquisition, though at this point the vast majority of FTG’s revenue still comes from product sales rather than services. The CEO, Brad Bourne, has a meaningful insider ownership of around 10% of the company’s shares outstanding, indicating a strong alignment of interest between shareholders and management. FTG’s business is expected to continue to benefit from the aerospace industry recovery, which is still below pre-pandemic levels in terms of aircraft shipments. Management’s long-term goal is to grow revenue and earnings by around 15% per year on average in the long-term through organic growth and acquisitions. FTG is trading at a reasonable valuation, and if the company can manage to continue to maintain the business momentum, shareholders should be rewarded. We think it is still early for FTG in terms of compounding capital, and we are initiating our rating at “B.”

DOO has experienced an industry downturn that lasted longer than expected due to weak consumer spending. To address the downturn, DOO’s management proactively right-sized network inventory and protected brand value and dealer profitability. With that said, this is an industry-wide issue rather than company-specific challenges, as the company managed to maintain leadership in market share across the portfolio. Management has refocused all resources on one goal: extending the leadership position in powersports and has positioned the company to rapidly ramp up production to meet demand once the industry recovers, with limited investments required. The company has successfully managed downturn cycles in the past and is positioned to do it again this time. There are early signs of a turnaround as the most recent quarter could mark the bottom in this cycle. To be conservative, for now we are maintaining our rating at “B”.

A growth acquisition could be a good catalyst, but ENGH’s particular niche in the tech sector has been less robust than the broader tech sector. We think a takeover/privatization may be possible as we feel management could be just as frustrated as public shareholders. Overall, this name has been fairly disappointing amid a tech boom in recent years, and as a result of its lagging performance and execution, we are dropping coverage on the name.