Generac Holdings Inc (GNRC, Financial) has recently seen a daily gain of 3.51%, despite a 3-month loss of -1.28%. The company's Earnings Per Share (EPS) stands at 2.41. Does this suggest that the stock is significantly undervalued? Let's delve deeper into the valuation analysis to find out.
Company Introduction
Generac Holdings designs and manufactures power generation equipment, serving residential, commercial, and industrial markets. The company's products range from standby generators and portable generators to lighting, outdoor power equipment, and clean energy products. The majority of its sales are generated in the United States. With a stock price of $118.98 and a GF Value of $330.61, Generac Holdings appears to be significantly undervalued. But what does this mean for potential investors? Let's break down the company's value.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, taking into account historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line provides a visual representation of the stock's fair trading value.
Generac Holdings (GNRC, Financial) appears to be significantly undervalued according to the GF Value. The stock's current price of $118.98 per share and a market cap of $7.40 billion suggest that the long-term return of its stock is likely to be much higher than its business growth.
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Assessing Financial Strength
Before investing in a company, it's crucial to evaluate its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. Generac Holdings has a cash-to-debt ratio of 0.1, which is worse than 91.89% of 2773 companies in the Industrial Products industry. However, its overall financial strength is rated 6 out of 10, indicating a fair financial position.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors. Generac Holdings has been profitable 10 out of the past 10 years, with a revenue of $4 billion over the past twelve months. Its operating margin is 8.11%, which ranks better than 57.21% of companies in the Industrial Products industry. Generac Holdings' profitability is ranked 9 out of 10, indicating strong profitability.
Growth is a critical factor in the valuation of a company. The 3-year average annual revenue growth rate of Generac Holdings is 26.3%, which ranks better than 87.81% of companies in the Industrial Products industry. The 3-year average EBITDA growth rate is 18.3%, which ranks better than 65.61% of companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) and the weighted cost of capital (WACC) provides another perspective on its profitability. The ROIC measures how well a company generates cash flow relative to the capital it has invested in its business, while the WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. For the past 12 months, Generac Holdings's ROIC is 6.35, and its cost of capital is 10.86.
Conclusion
In conclusion, Generac Holdings' stock shows every sign of being significantly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 65.61% of companies in the Industrial Products industry. To learn more about Generac Holdings' stock, you can check out its 30-Year Financials here.
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