Hurricane Season Powers Generac

09/06/2018 5:00 am EST


Richard Moroney

Editor, Dow Theory Forecasts

Richard Moroney, editor of Upside Stocks, looks at generator maker Generac (GNRC), a stock that is particularly timely as Tropical Storm Gordon reminds investors of the potential dangers of hurricane season.

Many homeowners and businesses have Generac to thank for their ability to stay powered up. Founded in 1959, the company is a leading maker of backup generators for residential, commercial, and industrial use.

Generac also sells temporary light towers, pumps used by oil and natural gas producers, and outdoor power equipment. Robust demand for home generators is driving results, spurred by the aftermath of a destructive 2017 hurricane season and severe storms in the Northeast.

Qardrix is our proprietary quantitative ranking system. The stock earns above average scores in Quadrix for all six categories, contributing to an Overall rank of 98 (out of a possible 100).

At 13 times trailing earnings, Generac shares trade at a 36% discount to the median for S&P 1500 electrical equipment makers and 37% below its own five-year norm.

The stock also looks cheap versus historical norms for its price/sales, price/cash flow, and price/book ratios. In the June quarter, per-share earnings surged 63% on a sales increase of 25%.

Both exceeded Wall Street expectations. For full-year 2018, analysts project earnings-pershare growth of 21% to $4.10 on sales of $1.9 billion, up 13%. Over the past 30 days, the per-share-profit consensus has risen 10% for 2018 and 7% for 2019. Generac is being initiated as a Buy.

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