Gurus Would Bowl With Brunswick

This column was originally published on RealMoney on Sept. 6 at 10:28 a.m. EDT. It's being republished as a bonus for TheStreet.com readers.

From boats to bowling, Brunswick(BC Quote) is making waves and throwing strikes. The company's product lines includes Mercury boat engines, bowling and billiards equipment, Life Fitness and Hammer Strength fitness equipment, Brunswick bowling centers and a variety of boat nameplates, including Crestliner, Lowe, Lund, Triton, Albemarle, Sea Pro and Sea Boss. The company has been acquiring boat product lines during the past two years.

Brunswick recently reported that sales increased 12.4% and 14.4% in the second quarter and six-month period ended June 30 to $1.6 billion and $3.0 billion, respectively. Acquisitions played a role, accounting for approximately 20% and 30% of the sales gain. Diluted EPS rose 23.7% for the second quarter and 47.6% for the six-month period.

With its stock trading around $43, the company is doing well, is aggressively making acquisitions and -- most importantly -- two guru strategies indicate that Brunswick will continue to knock down pin after pin.

The John Neff Strategy

Brunswick bowled a strike with the strategy I base on the writings of John Neff. Neff's strategy looks for a stock to have a price-to-earnings ratio between 40% and 60% below the market P/E, which is 21 for the S&P 500. Brunswick's P/E is 12.6, which is 41.6% below the market's average and within the range this strategy desires.

The company pays a 60-cent dividend, and for dividend payers, Neff's strategy likes to see a historical earnings growth rate between 7% and 20%. Brunswick's just fits, being 19.8%, based on the average of the three-, four- and five-year historical EPS growth rates.

The historical growth rate for a Neff strategy approval should be confirmed by the consensus future-growth estimate of analysts for both the current fiscal year and the long term. As a result, both growth rates must be greater than 6% for dividend-paying stocks. The projected EPS growth rate for Brunswick is 22.4% for the current year and 12.3% for the long term.

Sales growth must be either greater than 7% or at least 70% of EPS growth under the Neff methodology. Brunswick's sales growth is 10.6%, based on the average of the three-, four- and five-year historical sales growth rates.

This strategy prefers stocks whose total return (EPS growth plus yield) divided by the P/E ratio is at least double that of the market or of the company's industry. Brunswick's total return-P/E ratio, which is 1.73, is acceptable because it is more than double the market average total return-P/E ratio of 0.65.