We’ve been watching Drew Industries with interest for some time now. We love the stock’s fundamentals, but we were waiting for it to hit a speed bump so that we could recommend it at a lower price. The stock, though, shows no sign of slowing down. Fortunately, even at this level Drew Industries (NYSE: DW) still offers 30% upside to investors.

The manufacturer of RV and motor-home parts has been on a tear. Drew’s earnings grew 23% in 2015 and exploded 76% in the first quarter due to a more profitable product mix. On May 9, 728,000 Drew shares were traded, quadruple the stock’s 90-day average. That spike in volume brought Drew to the attention of Profit Catalyst Alert.

A bundle of recent acquisitions expands Drew’s reach to the lucrative replacement and RV furniture markets, both product lines with higher-than-average profitability. At the same time, a bubble of baby boomers hitting the open road of retirement with jazzed-up RVs, along with the vehicles’ popularity with younger buyers, is firing up RV sales. Cheap gas doesn’t hurt either.

Drew is growing revenue much faster than industry rates by supplying an increasing number of replacement parts for each unit. The stock trades for a price-to-earnings ratio of 15, despite average earnings growth of 26%.

We especially like that as a supplier to many RV brands Drew wins no matter which manufacturer takes market share. Our $100 target offers almost 30% upside and is based on a multiple of 20 on 2017’s $5 estimate. Target price: $100

Americans Hit the Road

Record sales of motorized RVs and towable wholesale units were up 5% in 2015. Growth is expected to accelerate to 6% this year. Industry heavyweight Thor Industries (a customer of Drew’s), recently reported a remarkable 45% increase in backlog.

Anecdotal evidence supports a wave of RV demand. In New Mexico an RV resort is being built along the famous Route 66, complete with 100 full-service parking sites and two fenced-in dog parks. Over spring break, rangers at the Grand Canyon National Park warned of a 2.5 mile entrance line of RVs and cars waiting to enter.

After bumping along at a record $4 per gallon from 2011 until mid-2014, gasoline prices have steadily fallen to $2.50 per gallon, a decline of almost 40%. RV sales are tightly correlated to lower gas prices. With the average RV squeaking out only 10 miles per gallon in fuel efficiency, a summer of road trips can consume 800 gallons of gas. As a result, the benefit of lower gas prices is magnified for owners of these gas guzzlers.

The industry also is benefiting from a secular shift among younger millennials, adding to the already strong demand from retiring baby boomers. Almost a quarter of a million boomers turn 65 each month and many look to the RV life as their retirement plan.

That lifestyle beckons younger buyers as well. Industry experts note that after the 2008 financial meltdown the millennials began emphasizing experiences over possessions. Many young adults are harnessing the nostalgia of family road trips into their own zest for adventure. The average age of an RV owner in 1980 was 50 and is now 48 and falling, with the fastest-growing group of RV buyers between ages 35 and 44.

Soup to Nuts and Bolts

Drew’s acquisition strategy is two-pronged. Most of the company’s acquisitions were about adding more profitable RV components. Drew began by selling automotive hardware, like axles and suspension systems, but has added higher-profit product lines in the past year.

For instance, Drew’s March 2016 acquisition of Flair Interiors expands its selection of RV furniture. A July 2015 exclusive joint venture with LED TV and sound system manufacturer Furrion also contributes more profitable and highly desirable electronics to its menu of products.

Thanks to these additions, Drew now supplies $3,000 of components for the average RV, up 6% from last year, and $1,800 of components for trailers, up 13%. This new product growth layered on top of the industry’s expansion should allow Drew to continue growing revenue at percentage rates in the mid-teens.

The other strategic focus for acquisitions is diversification away from products for newly built RVs. Drew’s March 2016 purchase of High Water Marine Furniture beefs up the product line for customers outside of the RV market. Other acquired product lines supply components to buses, boat-hauling trailers and mobile office units.

Diversifying away from components that are solely for new RVs cushions Drew against a downturn in the industry while providing the company with a second layer of revenue from replacement parts. Furniture, awnings, mattresses, jacks and tool boxes are all items that need to be replaced over time. The RV industry is in the early part of a cyclical jump. When that cycle slows, Drew will still enjoy revenue and earnings growth because of this aftermarket business. As Drew expands its selection of aftermarket products, it effectively becomes a one-stop shop for repairing and upgrading older RVs.

Numbers Drive This Stock

That diversification strategy is playing out in Drew’s earnings, which are exploding. Product margins jumped from 21% to 24% in the last six months, as the improved profitability from the Furrion deal and other acquisitions lifted earnings.

Profits leaped 23% in 2015 and are expected to increase 41% this year to $4.52 per share. First-quarter earnings growth of 76% puts the company well on the road to hitting these numbers. Meanwhile, abundant free cash flow enabled Drew to pay off its debt quickly and keep debt balances in check. Despite $60 million of acquisitions in the past 12 months, debt levels have remained flat. With these kinds of numbers, it makes sense to park this steady driver in your portfolio.