Generac Holdings (GNRC) started out providing power generation equipment for construction applications and residential power back-up, notes Glenn Rogers, contributing editor to Internet Wealth Builder.
As time went by, it got into providing heavy industrial systems. More recently it has begun to add a large solar component to its offerings by way of backup batteries.
Generac’s revenue has been growing at a 19% annual growth rate since its IPO in 2010. The company also announced a few acquisitions over the last couple of years that greatly enhanced its overall product range.
For 2022, management is calling for a consolidated revenue increase of between 32% and 36% with margins between 22% and 23%. Free cash flow converted from net income will be between 70% and 80%.
Although Generac has not been trading well recently, it's still one of my favorite stocks. The shares sold off after the last earnings report when the company gave cautious guidance around supply chain issues, that have become all too familiar in earnings calls recently. As well, we have been dealing with volatility and uncertainty in recent months.
However, this company is in the right place strategically. It produces backup generators, solar storage monitoring equipment, and grid services natural gas generators. It has been aggressively expanding and acquiring companies that make it part of the key solutions to the overall power network in the US and globally.
Action now: The stock has been trending down since last fall but has recently shown signs of bottoming. I think this is an ideal opportunity to buy back into the stock and ride it back up to its previous high. Our price target is $450.