GNRC - Embedded Expectations Analysis - 2021 08 30
Generac Holdings Inc. (GNRC:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 32.5x Uniform P/E, implying bullish expectations for the firm. However, although management may have concerns about production guidance, recent acquisitions, and new energy storage technologies, market expectations are still too pessimistic, suggesting long-term equity upside remains warranted.Specifically, management may lack confidence in their ability to continue building out their installer network, expand their clean energy product suite to include microinverters, and double current build rates by the end of Q2 2022. Furthermore, management may also lack confidence in their ability to meet production guidance, continue investing aggressively in strategic acquisitions, and sustain broad-based growth as demand recovery accelerates. Moreover, they may be exaggerating their product differentiation and competitive position in energy storage, the potential of their new DC output generator to combine with solar and storage to operate independently of the power grid, and the potential of technology acquired from Chilicon. Finally, management may have concerns about integrating existing Chilicon products into a Generac solution, availability under their revolving credit facility, andhigher start-up costs in Q3 2021.
Although management may have concerns about production guidance, recent acquisitions, and new energy storage technologies, market expectations are still 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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