New Powder Or Ice Ahead?

Any company that has its headquarters in Thief River Falls, Minn., must surely be worth a look. And Arctco, a leading company in the snowmobile business, certainly is.

Arctco also makes snowmobile parts and cold-weather garments. It's a solid business, but the company hasn't been shielded from the cold winds of recession. Earnings declined to $1.06 a share in the fiscal year that ended in March, 1991, from $1.26 the year before.

Arctco's fortunes began to pick up, however, in the fiscal quarter that ended in September, when the company reported earnings of $11 million, or 86c a share, on sales of $79 million. That was a 17% increase in profits--which surprised analysts, who expected no pickup.

Street expectations remain dour, though, with analysts surveyed by Zacks Investment Research predicting that earnings will decline again, to $1 a share, in the fiscal year that ends in March, 1992. But Robert Sanborn, who runs Oakmark, a fast-growing small-cap mutual fund, thinks Arctco is still on the rebound--and that analysts have another surprise ahead. He sees earnings snapping back to $1.20 a share, which would be a p-e of just 11 at its recent price of $13 a share. "Arctco is selling at a deep discount to the market," says Sanborn, who has been buying.