- Wondering if Generac Holdings at around US$194 per share still offers value, or if the easy gains are already behind it? This article focuses squarely on what the current price implies.
- The stock has had a mixed run, with a 2.5% decline over the last week and a 17.8% decline over the last month, while still sitting on returns of 37.8% year to date and 53.0% over the past year.
- Recent coverage of Generac has highlighted renewed interest in companies linked to backup power and grid resilience. This helps explain why the stock has attracted attention despite short term share price weakness. News flow around energy reliability and infrastructure spending has kept investors focused on how businesses like Generac are positioned within that theme.
- Generac currently earns a valuation score of 2 out of 6. The next sections compare different valuation methods to see what that might mean for you, and then finish with a broader way to think about value beyond the usual ratios.
Generac Holdings scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Generac Holdings Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model takes estimates of a company’s future cash flows and discounts them back to today using a required rate of return, to arrive at an estimate of what the business might be worth per share.
For Generac Holdings, the model starts with last twelve month free cash flow of about $291.6 million. Analysts provide several years of forecasts, and Simply Wall St then extends those estimates further, using a 2 Stage Free Cash Flow to Equity approach to project cash flows out to 2035.
On this basis, free cash flow is projected to reach $910.1 million by 2030, with intermediate annual projections between 2026 and 2035 ranging from $351.4 million to about $1.3 billion before discounting. Each of these future cash flows is discounted back to today and summed to get an estimated intrinsic value for the equity.
The result of this DCF model is a fair value estimate of about $238.03 per share. This suggests the current price is at an 18.3% discount to that figure, indicating the shares are trading below this intrinsic value estimate.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Generac Holdings is undervalued by 18.3%. Track this in your watchlist or portfolio, or discover 61 more high quality undervalued stocks.
Approach 2: Generac Holdings Price vs Earnings
The P/E ratio is a common way to value profitable companies because it links what you pay per share to the earnings that each share generates. Higher growth expectations and lower perceived risk tend to justify a higher P/E, while slower growth or higher risk usually call for a lower, more conservative P/E range.
Generac Holdings currently trades on a P/E of 71.49x. That sits well above the Electrical industry average of 31.48x and the peer group average of 35.38x, which indicates the market is paying a much higher price for each dollar of Generac’s earnings compared to many peers.
Simply Wall St’s Fair Ratio for Generac is 44.10x. This is a proprietary estimate of what a more “normal” P/E might be, given factors such as earnings growth, profit margins, industry, market cap and company specific risks. Because it pulls these elements together in one number, the Fair Ratio can be more tailored than a simple comparison with peers or the industry, which may have very different growth, risk and profitability profiles.
Comparing the Fair Ratio of 44.10x with the current P/E of 71.49x suggests Generac is trading above this customized fair value benchmark.
Result: OVERVALUED
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Upgrade Your Decision Making: Choose your Generac Holdings Narrative
Earlier it was mentioned that there is an even better way to understand valuation, so Narratives are introduced as your way to attach a clear story about Generac Holdings to hard numbers like fair value, revenue, earnings and margin estimates. These Narratives then automatically connect that story to a live valuation that updates when new news or earnings arrive on Simply Wall St’s Community page. For example, one investor might build a bullish Generac Narrative around a Fair Value of US$292, data center demand and higher margins. Another might lean on a more cautious Fair Value of US$165 that focuses on grid reliability and competition. By comparing each Fair Value to the current share price you can decide whether the stock looks cheap or expensive relative to your own view rather than treating any single analyst target as the final word.
For Generac Holdings, we will make it really easy for you with previews of two leading Generac Holdings Narratives:
Fair value in this bullish narrative: US$292.00 per share.
Current price versus this fair value: around 33.4% below the narrative fair value.
Revenue growth assumption in this view: 15.28% a year.
- Sees AI data center power demand, international expansion and connected services as key drivers that could reshape Generac's earnings profile beyond current consensus expectations.
- Builds in revenue growth of 10.6% a year over the next 3 years and margin expansion to support earnings of US$653.1m by 2028, with a future P/E of 27.8x on those earnings.
- Flags meaningful risks around renewable adoption, regulatory pressure on fossil fuel generators, competition and potential improvements in grid reliability that could limit this upside.
Fair value in this cautious narrative: US$172.00 per share.
Current price versus this fair value: around 13.0% above the narrative fair value.
Revenue growth assumption in this view: 7.42% a year.
- Focuses on grid modernization, renewable energy and tighter regulation as headwinds that could reduce long term demand for conventional generators and pressure Generac's core revenue streams.
- Builds in more modest 4.6% annual revenue growth, earnings of US$472.8m by 2028 and a future P/E of 25.3x, which together support a US$165.00 price target in line with the lower end of analyst estimates.
- Accepts that data center backup, connected devices and capacity expansion offer support, but treats them as insufficient to fully offset margin pressure, competition and potential product obsolescence.
These two Narratives give you a clear range for what different analysts think Generac could be worth and what would need to happen in the business for each story to hold up, so you can decide which assumptions line up best with your own view on the stock.
Do you think there's more to the story for Generac Holdings? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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