Generac: Generating Backup Power And Potentially Strong Gains For Investors

Summary

• Generac provides power backup generators that protect homes, businesses, and mission critical infrastructure & healthcare facilities from electrical outages. It has also made investments for the smart grid future.
• The industry enjoys the tailwind of powerful trends and high returns on capital, and its US residential business has grown strongly over the past decade.
• Revenue has decelerated over the last quarters, which management attributes to a shortage of electricians needed to do the installations, and margins compressed due to increased logistics costs, but both factor appear to be moderating.
• Valuations have pulled back and the stock now trades at an earnings yield of over 6% and an EBITDA multiple of ~10x.
• It may be worth initiating a position in Generac but I would watch the days of inventory to sales closely.

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Overview

Generac Holdings Inc. (NYSE:GNRC) manufactures and markets power backup generators that protect homes from blackouts, businesses from loss of revenue, mission critical infrastructure (data centers, cell towers) from disruption, and healthcare facilities from the risk of loss of life due

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.