Generac (GNRC) Stock Looks Cheap on Cash Flow at Current Levels
Generac Holdings has delivered a strong share price recovery over the past year, yet the valuation picture is split. The Discounted Cash Flow (DCF) intrinsic value estimate points to meaningful upside from current levels, while market based multiples suggest the stock is on the expensive side.
- Over the past 5 years the stock is down 51.4%, which means long term holders have not yet recovered from earlier losses despite the more recent rebound.
- Future revenue and cash flow growth expectations may support the current price. However, any disappointment in execution or cash generation could limit how much investors are willing to pay for Generac Holdings.
- The company passes 3 of 6 valuation checks, which is a mixed picture rather than a clear bargain or clear overvaluation, according to its value score of 3.
The issue now is whether Generac Holdings' recent share price level already reflects most of the intrinsic value that the DCF suggests, or whether there is still a reasonable margin between price and value.
Find out why Generac Holdings' 29.3% return over the last year is lagging behind its peers.
Is Generac Holdings Still Cheap on Cash Flow?
The Discounted Cash Flow (DCF) approach estimates what Generac Holdings might be worth based on its future cash generation. The model uses latest twelve month free cash flow of about $348.8 million and assumes that free cash flow is growing rather than shrinking over time.
On these cash flow projections, the DCF model points to an estimated intrinsic value of about $298 per share. Compared with the current share price, this implies Generac Holdings stock trades at a 34.3% discount to that estimate, which suggests the market price sits well below what the cash flow assumptions support.
On this DCF view, Generac Holdings currently appears undervalued relative to its estimated intrinsic worth.
Our Discounted Cash Flow (DCF) analysis suggests Generac Holdings is undervalued by 34.3%. Track this in your watchlist or portfolio, or discover 49 more high quality undervalued stocks.
Has Generac Holdings Run Too Far on Earnings?
P/E is a useful cross check for Generac Holdings because earnings are a key driver of how investors value the stock alongside cash flow. Generac currently trades on a P/E of about 60.9x, which is well above the Electrical industry average of about 37.2x and higher than the peer group average of about 38.0x.
The fair P/E ratio suggested by the model is about 47.5x, which already factors in the company’s profile and risk. The gap between the current 60.9x and this fair level indicates that investors are paying a premium relative to what the model suggests based on those fundamentals. This highlights a richer valuation on earnings compared with both its sector and that tailored fair ratio.
On the P/E multiple, Generac Holdings stock currently appears more expensive relative to both peers and the model’s fair value estimate.
See what the numbers say about this price — find out in our valuation breakdown.
The Generac Holdings Narrative: What Would Justify Today's Price?
Simply Wall St Narratives pick up where this valuation puzzle for Generac Holdings leaves off. They spell out which assumptions about Generac Holdings' future growth, margins and earnings would need to hold for the stock to be worth materially more or less than today's price, and they sit on Simply Wall St's Community page. Rather than rely on a single multiple or model output, each one lays out its own set of drivers so you can compare those assumptions with actual results over time.
One of the top community narratives on Generac Holdings: 33% undervalued
"Accelerating demand for backup power solutions in data centers driven by AI adoption and global digitalization has resulted in a structural supply deficit for large commercial generators..."
Read one of the top narratives on Generac Holdings
Do you think there's more to the story for Generac Holdings? Head over to our Community to see what others are saying!
The Bottom Line
For Generac Holdings, the Discounted Cash Flow (DCF) intrinsic value estimate points to a sizeable valuation gap, while the P/E view indicates the stock trades on a richer multiple than peers. That split largely reflects a DCF that leans on future cash generation and a market multiple that reflects high expectations already in the price. With the broader checks only mixed, the key question is whether Generac can deliver on the growth and cash flow profile implied by the intrinsic value estimate. How that execution story unfolds is likely to decide whether today’s discount is an opportunity or a fair caution signal.
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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