GNRC - Generac: A Fantastic Long-Term Opportunity

2024-04-23 03:11:56 ET

Summary

• Generac's shares have fallen over 80% from their all-time high, creating an attractive valuation for investors.
• The company is well-positioned to benefit from long-term "megatrends" such as the evolution of the electrical grid, climate change, and the emergence of cleaner alternative fuels.
• Generac's residential business represents a significant growth opportunity, with the potential for increased penetration rates and strong sales growth in the coming years.

Thesis

For a seemingly simple business, shareholders of Generac ( GNRC ) have been through quite the emotional roller coaster over the years. Since hitting all-time highs in 2021 of $505.80, shares have fallen over 80% from peak to trough, translating to a loss of over $25B in shareholder value. This pessimism can largely be attributed to concerns over the high-interest rate environment, excessive inventories, and the overall cyclical nature of the business. However, with several long-term "megatrends" in place and a return to robust growth, the current valuation is beginning to look highly attractive.

Let's take a deep dive into Generac's business model and these "megatrends" to determine how attractive this valuation really is.

Company Overview

Generac is an industry-leading energy technology company offering backup power generation for residential, commercial, and industrial markets. Through several notable acquisitions, Generac has the broadest product portfolio in the industry, including solar + battery solutions, energy monitoring devices, and battery-powered tools....

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