{"id":12942,"date":"2023-08-19T02:01:44","date_gmt":"2023-08-19T02:01:44","guid":{"rendered":"https:\/\/isafespend.com\/investing\/buy-generac-stock-before-the-storms-start-its-a-growth-stock-at-a-value-price\/"},"modified":"2023-08-19T02:01:44","modified_gmt":"2023-08-19T02:01:44","slug":"buy-generac-stock-before-the-storms-start-its-a-growth-stock-at-a-value-price","status":"publish","type":"post","link":"https:\/\/isafespend.com\/?p=12942","title":{"rendered":"Buy Generac Stock Before the Storms Start. It\u2019s a Growth Stock at a Value Price."},"content":{"rendered":"
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Generac generators sit stacked in a warehouse. The company is working through an inventory glut.<\/h4>\n


\n Tim Boyle\/Bloomberg
\n <\/span>
\n <\/figcaption><\/figure>\n<\/p><\/div>\n

Sometimes growth stocks fall on hard times, leaving investors to ponder whether the good times will ever return. In the case of
\n Generac Holdings,<\/span>
\n it\u2019s a good time to buy a growth stock at a value price. <\/p>\n

Generac (ticker: GNRC) had been a consistent growth story, compounding earnings and revenue for most of its history on the market\u2014even through the Covid-19 pandemic. Not so this year. The maker of power-generation equipment is forecast to show a 37% drop in net income on a 11% decline in revenue in 2023. Ouch.<\/p>\n

\n

Its stock has suffered accordingly. Shares are down 56% over the past year, and 35% since Barron\u2019s<\/em> recommended buying them on Sept. 22.<\/p>\n

Back then, we cited the growing demand for backup power generators from homeowners and businesses. Generac, which has a market value of $6.8 billion, controls some three-quarters of the U.S. market for standby generators that can power a house through blackouts or other disruptions to the electricity supply.<\/p>\n

More frequent and destructive natural disasters, paired with growing demand from electric vehicles and other uses, add stress to grids. The average American electricity customer lost power for more than seven hours in 2021, according to the latest government data available. That\u2019s up from four hours on average five years earlier. Generac\u2019s products help keep the lights on.<\/p>\n

Many of the biggest potential markets for Generac\u2019s generators have very low rates of installed generators. Take California, where fewer than 2.5% of homes have standby power, versus many Northeastern states with penetration rates between 10% and 20%.<\/p>\n

With that kind of potential growth ahead, Generac regularly traded at a forward price\/earnings multiple in the mid-20s, a premium to other mid-cap industrial stocks. Generac, though, now trades at just 16 times, as the company works through an inventory glut\u2014an error of management\u2019s own making that was supposed to be resolved by now, but instead continues to weigh on sales and earnings. <\/p>\n

At the end of the second quarter, Generac\u2019s inventory levels were still around 20% to 30% higher than normal\u2014a 20-percentage-point improvement from the previous quarter, but short of management\u2019s own expectations\u2014and the company now expects it will take until the end of 2023 to get inventory balances back to normal. That prompted a cut to Generac\u2019s full-year revenue and earnings guidance, sending shares tumbling 24% in a day on Aug. 2.<\/p>\n

The dip in the stock more than compensates for the delay in inventory normalization, which doesn\u2019t impact the long-term story. Truist Securities analyst Jordan Levy upgraded Generac stock to Buy after the drop, with an unchanged price target of $160\u2014up 45% from a recent $110. <\/p>\n

\u201c[We see an] attractive entry point for investors to gain exposure to a well-established name in home\/commercial backup power with upside potential from a recovering Clean Energy segment,\u201d Levy wrote.<\/p>\n

Generac management will host an investor day in late September that could be a positive catalyst for the shares\u2014the event might focus on the company\u2019s promising clean-energy segment\u2014but that\u2019s not the only reason to like the shares. Headlines about heat waves and natural disasters can prompt sharp short-term moves in the stock. <\/p>\n

In fact, October, the peak month of the Atlantic hurricane season, has been particularly good for Generac, with the stock rising in 10 of 13 times that month since going public in 2010, with a median gain of 12%. Shares also tend to jump 10% the morning after a major storm makes landfall in Florida or Texas. <\/p>\n

It is stormy times for the quintessential \u201cstorm stock,\u201d but Generac\u2019s growth story is far from over.<\/p>\n

Write to <\/strong>Nicholas Jasinski at nicholas.jasinski@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Generac generators sit stacked in a warehouse. The company is working through an inventory glut. Tim Boyle\/Bloomberg Sometimes growth stocks fall on hard times, leaving investors to ponder whether the good times will ever return. In the case of Generac Holdings, it\u2019s a good time to buy a growth stock at a value price. Generac<\/p>\n","protected":false},"author":1,"featured_media":12943,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49],"tags":[],"class_list":{"0":"post-12942","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-investing"},"yoast_head":"\nBuy Generac Stock Before the Storms Start. It\u2019s a Growth Stock at a Value Price. | iSafeSpend<\/title>\n<meta name=\"description\" content=\"Generac generators sit stacked in a warehouse. The company is working through an inventory glut. 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