How the Recent 9.5% Pullback May Shape Generac’s 2025 Outlook

If you have ever considered investing in Generac Holdings, you are definitely not alone. The stock sits at that interesting crossroads where investors are wondering whether recent stumbles mean more trouble ahead, or if the pullback is quietly setting up a great entry point. Over the last month, Generac shares have slipped by 9.5%, capping off a modest 7-day dip of 1.0%. While the year-to-date gain of 4.5% is respectable, a one-year loss of 5.6% and a five-year retreat of 19.5% make it clear that the market is still trying to figure out how to price Generac’s potential versus its risks.

Some of this volatility is tied to broader market concerns, especially around macroeconomic changes that could influence consumer and industrial demand for backup power solutions. Still, the company’s core business remains relevant, and that lingering sense of untapped upside keeps Generac on analysts’ radar. The company stands strong on the value side too, notching a value score of 5 out of 6. This means Generac is considered undervalued according to five of the six standard checks savvy investors use to size up a stock’s true worth.

But is Generac truly undervalued, or just misunderstood? In the sections ahead, I will break down the main ways analysts measure a stock’s value, and reveal why one approach might give you an even clearer picture at the end of the analysis.

Why Generac Holdings is lagging behind its peers

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

The Discounted Cash Flow (DCF) model estimates a company's value by projecting its future free cash flows and discounting them back to today using a rate that reflects the investment risk. In essence, it provides an estimate of what the business is worth based on the cash it is expected to generate in the future, adjusted for the time value of money.

For Generac Holdings, analysts project Free Cash Flow (FCF) of $542.5 million over the last twelve months, with forecasts rising steadily. By 2029, FCF is projected to reach $668 million. This reflects analyst expectations and includes additional modeling beyond five years. These projections are central to the DCF approach, which takes each year’s estimate, discounts it back to a present value, and sums it all up for a fair price estimate today.

The result of this DCF analysis comes out to a fair value of $166.66 per share. When compared to the current market price, this implies shares are trading at a 1.5% discount to their intrinsic value. This suggests the current price is very close to fair value.

Result: ABOUT RIGHT

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

Simply Wall St performs a valuation analysis on every stock in the world every day (check out Generac Holdings's valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: Generac Holdings Price vs Earnings

The Price-to-Earnings (PE) ratio is a tried-and-true valuation tool, especially effective for companies with consistent profits like Generac Holdings. This ratio helps investors understand how much they are paying today for each dollar of the company’s earnings, making it a widely accepted quick check for value, provided the company is generating positive earnings.

Growth expectations and perceived risks both play a key role in what is considered a “normal” or “fair” PE ratio for any business. Rapidly growing companies or those with lower risk profiles often command higher PE ratios, while those with uncertain outlooks might trade at a discount.

Generac currently trades at a PE ratio of 26.7x. When set against the Electrical industry average of 28.4x, and the broader peer group’s 37.4x, Generac comes across as slightly below average. However, just looking at these comparisons only tells part of the story. Simply Wall St’s proprietary "Fair Ratio" digs deeper, establishing a benchmark of 30.0x for Generac based on more nuanced factors like the company’s actual earnings growth, profit margins, its industry, market capitalization, and unique risk profile. This method provides a clearer lens for value than simple peer or industry comparisons.

With Generac’s current PE ratio only slightly below its Fair Ratio (26.7x vs 30.0x), the stock appears to be valued in line with its true fundamentals, suggesting neither a bargain nor an overhyped premium.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Generac Holdings Narrative

Earlier, we mentioned there is an even better way to understand valuation. Let’s introduce you to Narratives. A Narrative is your personalized story about a company, connecting the dots between what you believe about Generac Holdings’ future and its estimated fair value using your own assumptions for things like revenue, earnings, and margins. Narratives turn the numbers into something meaningful, linking your outlook directly to a financial forecast and, ultimately, a fair value calculation. They are a simple and approachable tool available to everyone on Simply Wall St’s Community page, where millions of investors collaborate and track outlooks together.

With Narratives, you can quickly compare your own fair value estimate to the market price, making buy or sell decisions more transparent and tailored to your view of the business. These insights are kept fresh and relevant because each Narrative automatically updates as new news, earnings reports, or industry changes emerge. For example, some investors see Generac’s long-term growth from data center and backup demand and set a high fair value ($250). Others focus on risks in solar and grid dependence, pegging a much lower estimate ($165). Narratives give you the power to test, share, and refine your perspective alongside the facts, making better investment choices possible for everyone.

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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