REVG

We rate REV Group, Inc. (REVG) as a Buy with a composite score of 71.5/100 at a current price of $63.00. The stock scores above average across the majority of our six quantitative factors and ranks #70 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in value (92th percentile) and quality (92th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (30th percentile) and momentum (71th percentile) tempers our overall conviction. We assign a Narrow Moat rating (45/100), Low uncertainty, and Standard capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

REV Group, Inc. holds a mid-tier position (#36 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 71.5/100 places it at rank #70 in our full 7,333-stock universe. At $2.5B in market capitalization, REV Group, Inc. is a mid-cap player in the Manufacturing space, which limits certain scale advantages but may allow for more agile strategic execution.

The outlook is moderately positive, with revenue expanding at 4% and favorable momentum (71th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 15% (-27.5pp vs sector) narrow to operating margins of 7% (+6.1pp vs sector) and net margins of 3.9%, yielding a gross-to-net conversion rate of 26%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $63.00, REV Group, Inc. appears undervalued relative to its fundamentals. Our value factor score of 92/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 20.8x (roughly in line with the sector median of 22.3x), EV/EBITDA of 11.3x (near the sector median), P/B of 6.2x, P/S of 0.9x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Low uncertainty rating to REV Group, Inc.. The company exhibits strong financial stability with moderate market sensitivity, conservative leverage (10% D/E), and a stability factor in the 75th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

We identify no major risk factors at this time. The company's stability factor sits at the 75th percentile with quality at the 92th percentile, both of which support our low-risk assessment. The absence of material leverage, profitability, or volatility concerns reduces the likelihood of a permanent capital loss scenario.

Key risk mitigants include: conservative leverage (10% D/E) limits balance sheet risk; above-average stability (75th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate REV Group, Inc.'s capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 22.4%, and the balance sheet is managed within acceptable parameters (D/E: 10%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; REV Group, Inc. falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 0.47% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, REV Group, Inc. receives a Buy rating with a composite score of 71.5/100 (rank #70 of 7,333). Our quantitative framework assigns a Narrow Moat (45/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 72/100.

Our analysis supports a constructive view on REV Group, Inc.. The combination of identifiable competitive advantages, low uncertainty, and standard capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.