GNRC

Analysis of Generac Holdings (GNRC)

Technical Perspective: GNRC shows high volatility and recent underperformance, with significant price declines over short-term periods. While currently trading mid-range from its 52-week highs and lows, the elevated beta and deep drawdown history suggest ongoing instability. The stock may be nearing oversold levels, but cautious timing is advised given its unpredictable swings.

Fundamental Perspective: The company demonstrates solid revenue growth and a healthy balance sheet with low debt and good liquidity. However, profitability is under pressure with declining margins, and operational efficiency is weak—evidenced by low asset turnover and high inventory days. This indicates challenges in converting sales into robust earnings and cash flow.

Valuation & Risk: GNRC trades at premium valuation multiples with high P/E and EV/EBITDA ratios, implying lofty growth expectations. Combined with operational inefficiencies and high market volatility, the stock carries above-average risk. The absence of short interest may reduce near-term downside pressure but does not mitigate fundamental concerns.

Recommendation: GNRC is currently not a buy. While the company has a strong market position in power generation equipment, its elevated valuation, margin pressures, and inefficient operations present considerable risks. Investors should wait for clearer signs of improved profitability or a more attractive entry point before considering a position.

RockFlow Model Forecast: Three Scenarios for 2026

Based on the provided analysis, here is a 12-month outlook for Generac Holdings (GNRC):

12-Month Outlook for GNRC

The outlook for GNRC over the next year is cautious, with key catalysts likely being any signs of margin stabilization and improved inventory management to address operational inefficiencies. Potential risks are significant, primarily stemming from its premium valuation demanding flawless execution, ongoing profitability pressures, and high stock-specific volatility that could lead to further downside. Given the elevated risks and lack of a clear positive catalyst, a neutral to negative stance is warranted with a target range broadly in line with or potentially below the current price, reflecting the fundamentals that currently fail to support the high multiples.

Wall Street Consensus

Most Wall Street analysts are optimistic about GNRC's 12-month outlook, with consensus target around $160.26, indicating expected upside potential.

Overall, GNRC has investment potential but also faces challenges. Here are key factors to weigh before investing.

GNRC has demonstrated a volatile and challenging performance over the past year, characterized by significant declines and underperformance relative to the broader market.

The stock's short-term performance is notably weak, with a 1-month decline of 5.93% and a steeper 3-month drop of 8.27%. Critically, its 3-month relative strength of -11.64% signifies it is significantly underperforming the market during this period. The beta of 1.828 confirms this heightened volatility, indicating the stock moves with greater amplitude than the market.

Currently trading at $157.7, GNRC is positioned approximately in the middle of its 52-week range ($99.5-$203.25), suggesting a neutral stance after recovering from its 52-week low. However, given the recent downtrend, high volatility, and a relatively large 1-year max drawdown of -37.88%, the stock may be approaching an oversold condition, though it remains susceptible to further swings due to its high beta.

Revenue & Profitability: GNRC demonstrated solid revenue growth in Q3 2025, increasing to $1.11 billion from $1.06 billion the previous quarter. However, profitability metrics showed sequential pressure, with the net profit margin declining to 5.94% from 6.97%, indicating some margin compression despite top-line growth.

Financial Health: The company maintains a conservative capital structure with a low debt ratio of 0.25 and a favorable interest coverage ratio of 5.58 times. The current ratio of 2.18 reflects strong short-term liquidity, though the cash conversion cycle of nearly 148 days suggests considerable capital is tied up in working capital.

Operational Efficiency: GNRC's operational efficiency presents challenges, with a modest ROE of 2.5% and a low asset turnover of 0.20. The inventory turnover of 0.52 and days of inventory outstanding exceeding 174 days indicate significant inefficiencies in inventory management, negatively impacting overall capital utilization.

Valuation Level Analysis: GNRC appears overvalued based on traditional metrics, with an elevated TTM PE of 30.73 and a significantly higher forward PE of 36.85, indicating market expectations for premium growth. The stock's PB ratio of 3.47 and PS ratio of 2.14 further signal a valuation above book value and sales, while a negative PEG ratio of -3.60 and exceptionally high EV/EBITDA of 74.47 suggest concerns about earnings growth and operational efficiency.

Peer Comparison Analysis: Without industry average data for a direct comparison, a definitive peer assessment is challenging. However, the elevated PE, PB, and PS ratios generally indicate that GNRC's valuation may be at a premium compared to typical industry benchmarks. Given the absence of specific peer metrics, caution is advised in concluding its relative valuation stance versus competitors.

Volatility Risk GNRC exhibits high volatility risk, with a beta of 1.83 indicating it is approximately 83% more volatile than the broader market. This heightened sensitivity was evidenced by a significant one-year maximum drawdown of -37.88%, underscoring the potential for substantial price declines relative to market movements. Investors should be prepared for considerable price swings.

Other Risks Notably, the stock's short interest is reported as 'None,' suggesting a lack of significant bearish sentiment from sophisticated investors which can paradoxically signal complacency if negative surprises occur. However, this must be evaluated alongside other fundamental and liquidity factors that are not provided but remain critical to gauging overall risk.