A company’s business doesn’t have to be sexy to be lucrative for investors. High-flying technology firms are all well and good but a less than thrilling, old economy kind of company is perfectly fine, too.
There’s no difference as long as the returns are stellar. That’s the case with 62 year-old Generac Holdings, which makes decidedly unsexy but much needed backup generators.
The stock has surged more than 400% since the spring of last year. What’s intriguing about Generac now is its bid to be a player in the growing battery storage and solar industries after a couple of acquisitions.
Here’s a concise look at Generac’s prospects.
- Market value: $26.9 billion
Generac Holdings (GNRC, $425.87) has grown handsomely selling backup generators to consumers who have become more attuned to and proactive toward power outages.
Ice storms in Texas and fires in California offer vivid reminders about the importance of backup power.
But in 2019, Generac entered the battery storage business with a pair of acquisitions. By purchasing Pika Energy and Neurio Technology, GNRC positioned itself to develop and distribute its PWRcell and PWRview solar power products.
Sales are small and not broken out on earnings reports, but Generac touts PWRcell as a high-growth area for the company. And what we’re seeing with PWRcell today might be the thin end of the wedge – a setup many investors like.
Think Apple, where the relatively small services division is expected to be the next big leg of growth for the company, and contributed to about 19% of total sales in its fiscal second quarter.
And Amazon.com’s cloud division – at a little more than 10% of total sales – is seen as one of the linchpins of the company’s growth.
Generac enters the solar business with two distinct advantages. First, it’s reliably growing in its core generator business, increasing sales and cash flow at an average annual rate of 10% during the last five years, according to Value Line.
Notably, cash flow from operations last year was some $487 million, plenty to finance its foray into the solar business.
Second, unlike Enphase and SolarEdge, which rely principally on third-party sellers and are relatively young companies:
Generac has been doing business since 1959, has a global network of 7,000 dealers and has decades of customer data that it can ply with its solar offering.
Shares have been high-fliers, up more than 410% since April of last year. Arguably, much of the enthusiasm is being driven by generators, but GNRC could emerge as one of the best solar stocks as its green energy business takes hold.
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