The aim of this blog is to spotlight some of the best opportunities in the fast-developing world of environmentally sustainable business.
The company that has caught my eye this month is Generac Holdings Inc. (GNRC), which styles itself “a global leader in the design and manufacture of a wide range of residential, commercial and industrial power products.”
There can be no doubt that with so many disruptive natural events going on, the temporary power market will continue to grow fast, and that’s creating some big opportunities for those well positioned to catch the wave.
A month ago, Generac posted yet more record results that show it is still rapidly building on its already dominating presence in the green energy marketplace, Reuters reported.
Generac is North America’s leading producer of portable power generators in a market that is set to grow by 50% in just the next four years. The company says it already sells more than 75% of all home generators in North America.
Market penetration is still at only 5%, so that gives it a mouth-watering amount of potential upside to build on its impressive existing sales of over $2 billion, selling into over 150 countries around the world, the company said.
According to Merrill Lynch analyst Ross Gilardi, the business provides the “best growth outlook in U.S. machinery by a country mile,” Fox Business Network reported.
The Waukesha, Wisconsin-based company grew earnings by an eye-catching 28% last year, and continues to grow earnings by over 8%.
Generac’s price-earnings ratio is 23.83, which is above the average for the sector (17.8), but this isn’t steep in my view for a company so well placed in this highly specialist market and a 100% record in recent times of exceeding market expectations, and it shouldn’t take long to grow into that rating.
Nevertheless, right now one or two analysts, reckoning that 8% growth is lower than the sector average and have reduced their recommendations to "hold" (Bank of America for example), but that’s supposing Generac doesn’t make yet more acquisitions. So far, Generac has put itself on track to grow more than just organically, and this year alone it has made two new additions to its stable, adding to the 13 it has made since 2011.
The two additions are:
- Pika Energy, a manufacturer of innovative battery storage technologies that capture and store solar or grid power for homeowners and businesses, including solar inverters, DC converters, and smart batteries.
- Neurio Technology Inc., which develops a software integrated energy monitoring device to optimize utility consumption for the residential sector, was acquired.
Goldman’s still have egg on their face from their "sell" call in July 2017 – which can’t have pleased investors who took the advice and lost out on a near 100% stock price gain over the next 15 months! No one’s saying "sell" anymore!
Meanwhile, Generac is one of three high-growth stocks Warren Buffett wishes he was still able to invest in, but these days the vast size of his funds restricts him to large caps, Financial News Now reported.
Generac’s track record, management, prospects and excellent environmental credentials make me a firm believer, and my recommendation is "buy" on any short-term price setback nearer $90. (I don’t hold any shares yet)
Simon Lamb is a writer, businessman, farmer, countryman, and passionate conservationist who was educated at Wellington College, Berkshire, England, studying math, languages and economics. His new book, "Junglenomics," represents the culmination of the insights gained during that time into the underlying causes of the world environment crisis, and presents a unified plan to address it based on the workings of ecosystems.
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