Generac Holdings has seen its share price move around in recent years, and the stock last closed at US$203.14. The question for you as an investor is whether that price can be squared with the cash the business is expected to generate over time.
- Over the past 3 years the stock has returned 138.7%, which puts a lot of weight on whether the underlying cash flows are strong enough to support that kind of move.
- The company’s value story is increasingly tied to how efficiently it can turn its equipment sales and related services into steady free cash flow that supports its ongoing investment needs.
- Prefer to judge Generac Holdings on earnings? See why Generac Holdings's 46.5x P/E tells a different valuation story.
The stock’s next move may depend on whether Generac Holdings’ current share price lines up with its intrinsic value estimate based on its cash flows.
If you want to stress test this same cash flow question beyond Generac Holdings, you can compare it with 33 high quality undervalued stocks.
Is Generac Holdings a Bargain on Cash Flow?
The Discounted Cash Flow (DCF) model here focuses on the cash Generac Holdings can return to shareholders over time. Latest twelve month free cash flow sits at about $386.3 million, so the valuation hinges on that cash base growing rather than staying static. Analysts and model estimates point to higher free cash flow levels in later years, which is what drives most of the DCF value.
Those projections build in a growing cash flow profile through 2030 and beyond, rather than a shrinking or flat business. When that stream of forecast cash flows is discounted back, the resulting intrinsic value estimate comes out substantially above the current share price of $203.14. This means the model implies that the stock price is not fully reflecting those projected cash flows. Find out what Generac Holdings could be worth using our Discounted Cash Flow (DCF) estimate.
The Generac Holdings Narrative: What Would Justify Today's Price?
Simply Wall St Narratives pick up where that DCF puzzle for Generac Holdings leaves off by spelling out which expectations for future growth, profitability and earnings would need to hold for the stock to be worth materially more or materially less than today's price, and they live on Simply Wall St's Community page. Rather than relying on a single valuation output, each Narrative lays out the assumptions behind its fair value so you can compare them with actual results as they are reported.
One of the top community narratives on Generac Holdings: 30% undervalued
"The main factor is Generac Holdings scaling its expanded large megawatt and residential platforms efficiently enough to support higher margins and recurring revenue…"
Discover why this Narrative puts Generac Holdings at 30% undervalued.
One more piece before you judge Generac Holdings
Before you lean too hard on any valuation work, it helps to know who is steering Generac Holdings, how their incentives line up with long term outcomes, and whether that pay structure really matches your expectations. See who runs Generac Holdings and how they are paid.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com