GNRC - Embedded Expectations Analysis - 2021 05 25
Generac Holdings Inc. (GNRC:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 27.2x Uniform P/E, implying somewhat bullish expectations for the firm. However, although management's concerns about supply chain logistics, shipments volume, and generator demand suggest the potential for near-term headwinds, market expectations are still too pessimistic, suggesting long-term equity upside remains warrantedSpecifically, management may have concerns about the seasonality of their sales, supply chain logistics and component availability issues, and battery cell production constraints. Also, they may lack confidence in their ability to maintain revenue outperformance, sustain EBITDA margin levels, and preserve their safety stock inventories. Furthermore, they may have concerns about the sustainability of demand for clean-energy products, portable generators, and C&I products. Moreover, management may lack confidence in their ability to capitalize on unusually cold weather in Texas for their home standby generators and increase mobile product shipments
Although management's concerns about supply chain logistics, shipments volume, and generator demand suggest the potential for near-term headwinds, market expectations appear too pessimistic given the firm's market dominance and substantial growth opportunities. As such, long-term equity upside remains warranted
Generac Holdings is a designer and manufacturer of a range of power generation equipment and other power products serving the residential, light commercial and industrial markets. The company's products include residential, commercial and industrial standby generators, as well as portable and mobile generators used in a range of applications. Other engine powered products that the company designs and manufactures include light towers which provide temporary lighting for various end markets; commercial and industrial mobile heaters and pumps used in the oil and gas, construction and other industrial markets; and a product line of outdoor power equipment for residential and commercial use.
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