GNRC Stock Forecast: Business Growth Under the Institutional Investors Wing

Zhou HeThis GNRC Stock Forecast article was written by Zhou He – Financial Analyst at I Know First.

Highlights

  • Net sales rose 40% yearly to $1.29 billion, beating consensus estimates by 2.4%.
  • GNRC recently acquired Blue Pillar, an industrial IoT software platform.
  • Institutional investors currently hold 90.4% of the company’s shares.
(Source: pixabay.com)

Overview

Generac Holdings Inc. (NYSE: GNRC) was founded in 1959 and is headquartered in Waukesha, Wisconsin. Generac Holdings Inc. designs manufactures and sells power generation equipment, energy storage systems, and other power products for the global residential, light commercial, and industrial markets. The company supplies engines, alternators, batteries, electronic controls, steel housings, and other components. In addition, it provides lighthouses, mobile generators, and mobile energy storage systems. The company sells aftermarket parts and product accessories to dealers. It distributes its products, and directly to end users.

GNRC Stock Forecast: Where Does GNRC’s Profitability Come From

GNRC’s performance benefited from strong demand for both residential and commercial and industrial products and strengthened end-market activity in most regions. The company recently reported better-than-expected second-quarter 2022 results. Generac reported an adjusted EPS of $2.99. In addition, profit increased by 25.1% year-on-year. Net sales rose 40% yearly to $1.29 billion, beating consensus estimates by 2.4%. Strong demand for residential and commercial and industrial products drove Generac’s second-quarter results. Core sales increased 33% year over year. Generac expects 2022 revenue growth of between 36% and 40%, in line with previous guidance. This includes a 5% to 7% net impact from acquisitions and foreign currency changes. Net profit margin is expected to be 13-14%. The adjusted EBITDA margin is estimated to be between 21.5-22.5%. Generac has beaten estimates in three of the past four quarters, delivering an average windfall of 6.7%.

In terms of market segments and report of 10Q, 2022provided by the company on three months ended June 30, domestic revenue increased 42% year-on-year to $1.13 billion, mainly due to the impact of acquisitions that contributed nearly 6% of revenue. Higher demand for home backup generators and strength in commercial and industrial products are the driving factors. International revenue rose 43% to $203.3 million, driven by solid performance across all regions, particularly Europe and Latin America. The impact of acquisitions and foreign exchange contributed nearly 9% to revenue. On the product side, revenue from residential surged 49% to $896 million. C&I’s revenue was $309 million, up 22% from the year-ago level. Revenue from other product categories was $86 million, up 30.9% year over year. Let’s see what trends the six-month ended reports show.

GNRC Stock Forecast: revenue
Source: Form Q3-FY22 by GNRC
(Figure 1 – The Revenue Structure, Six Months Ended on June 30 for 2021 – 2022)

Shares of GNRC have lost 20.26% in the past month, lagging the Computers and Technology sector’s 11.97% loss and the S&P 500’s 9.22% loss in that time. But GNRC currently trades at a forward P/E ratio of 10.91. Its industry has an average forward P/E ratio of 14.61, so we can conclude that Generac Holdings is trading relatively unbiasedly. Many analysts also maintain a positive attitude and assessment, and the profitability shown in the quarterly table can also support our continued focus.

GNRC recently acquired Blue Pillar, an industrial IoT software platform, for an undisclosed sum. The acquisition will help Generac offer monitoring capabilities as “built-in capabilities” by integrating the Blue Pillar platform with its suite of power generation products and projects from Generac Grid Services. Both companies share a common customer base and a compatible product portfolio. With the acquisition of Blue Pillar, the company will be able to provide comprehensive connectivity solutions to commercial and industrial customers.​​​ Some notable recent acquisitions include ecobee, Aprity, and Off Grid Energy Ltd. In December 2021, Generac acquired ecobee, a leader in sustainable smart home solutions. Prior to this, GNRC acquired Apricity Code Corporation for an undisclosed amount. The acquisition will strengthen Generac’s efforts to provide a broader portfolio of energy technologies. It will also accelerate the time-to-market of the company’s clean energy and grid services products and solutions.

CEO Aaron Jagdfeld sold 5,000 Generac shares in a deal that took place on Monday, Aug. 1. The stock sold for an average price of $264.96 for a total volume of $1,324,800.00. After the sale, the CEO now owns 610,975 shares of the company’s stock, worth about $161,883,936. Several institutional investors and hedge funds have recently bought and sold the company’s stock. New England Research & Management Inc. acquired new positions at Generac in the third quarter, valued at approximately $338,000. Bath Savings Trust Co increased its holdings of Generac shares by 1.2% in the third quarter. Bath Savings Trust Co now owns 16,119 shares of the tech company’s stock worth $2,871,000 after buying an additional 186 shares in the previous quarter. Institutional investors currently hold 90.40% of the company’s shares.

Let us look at GNRC’s performance across the Industrial Products Industry. According to GuruFocus, GNRC is one of the most profitable companies in the industry. GNRC’s ROE is the highest at 24.09 is better than 91.78% of companies in the industry. The Net Margin of 11.27% is higher than 78.46% of companies in the industry. ROA of 10.73% is better than 87.64% of companies. The Operating Margin of 16.73% is higher than 87.2% of companies in the industry. The Revenue Growth Rate is better than 87.5% of companies in the industry.

GNRC Stock Forecast: financial ratios
Source: Gurufocus.com
(Figure 2: GNRC vs Industrial Products industry in TTM)

Let’s look at the next comparable companies: GNRC, RRX, GGG, AOS, MIDD, NDSN, DCI, and ITT. According to Figure 3, the GNRC P/E ratio is lower than the Average and higher than Median values across comparable companies.

GNRC Stock Forecast: P/E ratio
Source: Gurufocus.com
(Figure 3: P/E Ratio)

Let’s look at the company credit test and financial positions.

(Source: Gurufocus.com)

The Altman Z-score, which determines the result of a credit test, stays near the bored of the Grey and Safe zones. At the same time, GNRC looks interesting in terms of the Piotroski F-Score. Piotroski F-score is a number between 0 and 9 that is used to assess the soundness of a company’s financial position. A score of 4 may indicate that the company’s financial situation is typical for a stable company.

(Source: Yahoo Finance)

The Yahoo Finance coverage for the company is performed by 11 analysts: 3 take the strong buy position. 1 takes the buy position, and 7 takes the hold position. The recommendation Rating is 1.7. The analysts’ community puts the average target price for the stock at $335.1 while it is traded at $152.06.

GNRC Stock Forecast: Conclusion

With reports and plans for record performance driven by increased capacity, strong execution, and improved profit margins, the company is remarkable. Generac’s introduction of smart home energy products has long-term advantages due to a more lasting shift in consumer spending propensity on home improvement items. Higher penetration of renewable energy will drive a new electricity tariff structure in the U.S., which may boost the use of Generac products. Therefore, this company will gradually penetrate our lives and become an indispensable part. The outcome of my forecast for GNRC stock will be bullish.

It is worth paying attention that the stock-picking AI of I Know First has a high signal on the one-year market trend forecasts. The light green for the short-term forecasts is mildly bullish, while the darker green is a strong bullish signal for the one-year forecast.

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Please note-for trading decisions and use the most recent forecast.