Generac Holdings Inc.

Analysis of GNRC (Generac Holdings Inc.)

Technical Perspective GNRC has shown explosive momentum, posting gains of nearly 48% over three months and trading near its 52-week high. While this reflects strong bullish sentiment, the stock’s high beta of 1.8 implies heightened volatility, and its proximity to peak levels after such a rapid rise hints at limited near-term upside. The 33% maximum drawdown over the past year further underscores its unstable trajectory.

Fundamental Assessment Fundamentals reveal pressing concerns: Q4Q 2025 saw a sharp profitability decline, with negative operating and net income margins. Although liquidity is adequate with a current ratio above 2, negative interest coverage and weak operational metrics—such as negative ROE and a cash conversion cycle of 155 days—signal inefficiency and earnings pressure.

Valuation & Risk Outlook Valuation is problematic, with a high trailing P/E of 44 and negative forward multiples, suggesting overvaluation amid profitability challenges. The PEG ratio below 1 offers a silver lining if growth materializes, but high volatility and drawdown risk remain significant concerns given the stock’s sensitivity to market swings.

Investment Recommendation Given GNRC’s rich valuation, unstable profitability, and high volatility, it is not currently a compelling buy. While momentum is strong, fundamentals do not support the premium price, and the stock appears vulnerable to a pullback. Investors should await clearer signs of earnings recovery and improved operational efficiency before considering a position.

*Note: This is not investment advice, for reference only.*

RockFlow Model Forecast: Three Scenarios for 2026

Based on the provided analysis, the 12-month outlook for GNRC is cautious. Key catalysts are tied squarely to a material reversal of its negative profitability trends, such as evidence of earnings recovery and an improved cash conversion cycle. The primary risks are its rich valuation paired with weak fundamentals, high volatility (beta of 1.8), and vulnerability to a significant pullback given its rapid price ascent. While a specific analyst target is unavailable, the overvaluation and operational inefficiencies suggest limited upside from the current price near its 52-week high, making the risk/reward profile unfavorable.

Wall Street Consensus

Most Wall Street analysts are optimistic about Generac Holdings Inc.'s 12-month outlook, with consensus target around $227.47, indicating expected upside potential.

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

GNRC has delivered exceptionally strong performance with substantial recent gains driving significant outperformance versus the market. The stock has demonstrated explosive momentum over recent months, recovering sharply from earlier weakness to approach new highs.

The stock has posted remarkable short-term gains, rising 44.62% over one month and 47.83% over three months, dramatically outperforming the market by nearly 48 percentage points. This explosive momentum reflects extremely bullish sentiment, though the high beta of 1.814 indicates substantially higher volatility than the broader market.

GNRC currently trades near its 52-week high of $236, sitting at approximately 98.9% of its yearly range following the substantial rally. While not technically overbought, the proximity to all-time highs after such rapid appreciation suggests limited immediate upside potential, especially considering the stock's 32.77% maximum drawdown during the past year highlights its volatile nature.

Revenue & Profitability GNRC's Q4 2025 performance shows concerning profitability trends despite relatively stable revenue. The company swung to an operating loss of -0.9% margin and negative net income margin of -2.2%, compared to a healthy 9.3% operating margin in Q3. This deterioration reflects significant pressure on profitability, particularly given the gross margin compression from 38.3% to 36.3% quarter-over-quarter.

Financial Health The company maintains adequate liquidity with a current ratio of 2.03, though the quick ratio of 1.0 suggests moderate dependence on inventory. With a debt-to-equity ratio of 0.57 and total debt-to-capitalization of 36.3%, GNRC's leverage appears manageable, but the negative interest coverage ratio of -0.55 indicates insufficient operating earnings to cover interest expenses.

Operational Efficiency Operational metrics reveal challenges, with ROE and ROA both negative at -0.9% and -0.4% respectively. The extended cash conversion cycle of 155 days, driven by high inventory outstanding of 162 days, suggests inefficient working capital management. Asset turnover of 0.20 indicates relatively weak revenue generation from the company's asset base.

Based on the available data, GNRC appears overvalued on a trailing earnings basis with a high TTM P/E of 44.04, which suggests investors are paying a significant premium for its current earnings. However, the valuation picture is severely clouded by the negative forward P/E and negative EV/EBITDA, both of which indicate that the company is currently expected to report either a net loss or minimal earnings in the near term. This makes a standard valuation assessment unreliable and signals potential fundamental challenges.

Without industry average data for a peer comparison, a conclusive relative valuation is not possible. The negative forward-looking multiples (P/E and EV/EBITDA) are stark outliers that would typically deviate significantly from a healthy industry average. The PEG ratio below 1.0, based on the TTM P/E, is a positive indicator suggesting the stock could be reasonably valued if future earnings growth materializes as expected, but this is contingent on the company returning to profitability.

Volatility risk is high, as evidenced by the elevated beta of 1.814, indicating the stock is significantly more volatile than the broader market. This heightened sensitivity is further confirmed by the substantial one-year maximum drawdown of -32.77%, illustrating considerable downside risk during recent market stress.

Other risks appear atypical, with the absence of reported short interest suggesting no significant speculative bets against the company. However, while this may imply broad market confidence, the lack of readily available short interest data could also point to potential liquidity constraints or lower trading volume.