Generac Holdings Inc (GNRC, Financial) experienced a daily loss of -2.11% and a 3-month loss of -0.09%. With an Earnings Per Share (EPS) of 2.41, the question arises - is the stock significantly undervalued? This article aims to provide a comprehensive analysis of Generac Holdings' valuation, inviting readers to delve into the financial intricacies of the company.
Introduction to Generac Holdings Inc (GNRC, Financial)
Generac Holdings designs and manufactures power generation equipment, catering to residential, commercial, and industrial markets. The company offers standby generators, portable generators, lighting, outdoor power equipment, and a clean energy product suite. The majority of its sales are generated in the United States. The current stock price stands at $115.63, with a market cap of $7.20 billion. The GF Value, an estimation of fair value, is $331.28, indicating that the stock may be significantly undervalued. The following sections will delve deeper into the company's value, incorporating a detailed financial assessment.
Understanding the GF Value
The GF Value represents the intrinsic value of a stock, derived from GuruFocus' unique method. It is calculated based on historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow), the GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of business performance. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded.
Generac Holdings (GNRC, Financial) appears to be significantly undervalued based on the GuruFocus Value calculation. This suggests that the long-term return of its stock is likely to be much higher than its business growth.
Financial Strength of Generac Holdings
Before investing, it's crucial to assess the financial strength of a company. Companies with poor financial strength pose a higher risk of permanent loss. The cash-to-debt ratio and interest coverage are effective measures to gauge a company's financial strength. Generac Holdings has a cash-to-debt ratio of 0.1, lower than 91.65% of 2789 companies in the Industrial Products industry. The overall financial strength of Generac Holdings is rated as fair.
Profitability and Growth of Generac Holdings
Investing in profitable companies carries less risk, especially those demonstrating consistent profitability over the long term. Generac Holdings has been profitable 10 years over the past 10 years, with revenues of $4 billion and Earnings Per Share (EPS) of $2.41 in the past 12 months. Its operating margin of 8.11% is better than 57.21% of 2800 companies in the Industrial Products industry. Overall, Generac Holdings's profitability is ranked as strong.
Growth is a critical factor in a company's valuation. Generac Holdings boasts a 3-year average annual revenue growth of 26.3%, ranking better than 87.76% of 2672 companies in the Industrial Products industry. Its 3-year average EBITDA growth rate is 18.3%, which ranks better than 65.47% of 2363 companies in the same industry.
Evaluating Profitability: ROIC vs WACC
Profitability can also be evaluated by comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. Generac Holdings's ROIC is 6.35 while its WACC is 10.86.
Conclusion
In conclusion, the stock of Generac Holdings (GNRC, Financial) appears to be significantly undervalued. The company's financial condition is fair, its profitability is strong, and its growth ranks better than 65.47% of 2363 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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