Does Generac Still Have Room to Run After 12% Weekly Surge and Grid Reliability News?

Thinking about what to do with Generac Holdings stock? You are not alone. The stock has served up a wild ride, with a 12% jump just in the past week and a 21.3% gain so far this year. Over the last three years, shares have soared 74%. Yet, if you had bought in five years ago, you might still be underwater, as the five-year total return is down 10.2%. This mix of recent momentum and long-term complexity means investors are eager to know if there is true upside left or if risk is being reappraised.

Much of Generac’s action tracks broader sentiment in the power generation and backup-energy market. Recent news about rising concerns over grid reliability and weather-related outages have breathed life into the story that Generac could benefit from long-term shifts in how homes and businesses approach power security. At the same time, legacy supply chain hiccups and changing competition create both opportunities and question marks.

But are shares actually undervalued right now? According to a standard valuation screening across six key checks, Generac only passes one. That puts its overall value score at 1, suggesting that the stock may not stand out as a deep bargain based on traditional measures. Still, those headline numbers rarely tell the full story up front.

Next, we will dig into the main valuation approaches analysts use to judge Generac, before revealing a smarter, more insightful way to look at what the company might really be worth.

Generac Holdings scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Generac Holdings Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s true worth by projecting its future cash flows and discounting them back to today’s value, accounting for the time value of money. This approach focuses on the company’s ability to generate cash over the long term, which is key for investors seeking intrinsic valuation benchmarks.

For Generac Holdings, analysts estimate current Free Cash Flow (FCF) at $542.5 million. Projections suggest gradual FCF growth each year, reaching about $827 million by 2035. Over the next five years, forecasted annual increases are based on analyst consensus, while longer-term figures are extrapolated by Simply Wall St’s modeling. All projections are in US dollars, and the gradual climb in expected FCF points to ongoing operational momentum.

Based on this DCF analysis, the estimated intrinsic value per share is $165.37. This figure is approximately 15.2% below the current stock price, which implies Generac Holdings is overvalued according to this metric.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Generac Holdings.

Our Discounted Cash Flow (DCF) analysis suggests Generac Holdings may be overvalued by 15.2%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Generac Holdings Price vs Earnings

The Price-to-Earnings (PE) ratio is a common tool for valuing profitable companies because it reflects how much investors are willing to pay for each dollar of earnings. A company with strong or accelerating earnings growth often commands a higher PE, while increased risk or business uncertainty can push this ratio down. In short, the “right” PE depends not just on the company’s current profits but also on future expectations and the market’s view of risk.

Generac Holdings currently trades at a PE ratio of 31.0x. For comparison, this is close to the average for the broader electrical industry at 30.4x, but below the peer group average of 42.0x. This suggests the stock is neither especially cheap nor premium-priced when viewed against sector and peer benchmarks.

To get a more precise read, Simply Wall St calculates a proprietary “Fair Ratio.” In this case, the Fair Ratio is 30.8x. This unique metric uses a wider lens than traditional benchmarks by measuring factors such as Generac’s earnings growth potential, profit margin, market cap, and baseline industry risk. By incorporating more company-specific details, the Fair Ratio provides a more actionable benchmark than simply comparing Generac to broad averages.

Given that Generac’s actual PE is 31.0x compared to its Fair Ratio of 30.8x, the stock’s valuation looks about right on this basis.

Result: ABOUT RIGHT

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Upgrade Your Decision Making: Choose your Generac Holdings Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. Instead of just numbers, a Narrative lets you attach a story to your investment: your own view of Generac Holdings’ future, including what you believe its revenue, profit margins, and risk factors will look like, and how these lead to your personal “fair value” estimate.

This approach goes beyond static metrics. A Narrative connects your expectations and reasoning about the business directly to financial forecasts and valuation. On Simply Wall St’s Community page, millions of investors use Narratives to record and refine their perspectives, making it simple to check whether a stock’s current price matches their outlook, and to adjust course as new facts emerge.

Narratives are dynamic and update as news and earnings come in, so you can see how your viewpoint compares to others over time. For Generac Holdings, for example, Narratives from the Community currently range from highly optimistic. One user expects robust demand for data center backup power to drive earnings and margins far above consensus and sets a fair value near $250. Another user is much more cautious, flagging solar headwinds and relying on outages for growth and estimating a fair value close to $165.

No matter your view, Narratives help you define and revisit your investment case, making buy and sell decisions clear-headed and personalized.

Do you think there's more to the story for Generac Holdings? Create your own Narrative to let the Community know!

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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