Some years ago, a winter of storms left much of Southern Saskatchewan without electric power for over a week.
The rush to buy standby generators cleaned the shelves of provincial dealers.
Chances are most of those generators bore the Generac brand name.
The 63-year-old Wisconsin company dominates the U.S. market for generators in residential/industrial and commercial use.
The backup residential generators range from 75KW to 150 KW. Commercial and industrial units go up to 3.25 thousand KW.
About 54 pr cent of revenues are residential generators with 35 per cent commercial and industrial units and 11 per cent from parts and accessories.
Storms have significant impact on sales. The three largest markets in the United States are the stormy states of Texas, California and Florida.
Every time major storms hit the U.S. Generac sales spurt ahead as in 2020, 2021 and 2022.
Generac estimates only 5.75 per cent of residential homes are equipped with backup generators.
That leaves a lot of homes potentially needing a power backup to cope with outages caused by climate change and the frequent mysterious power outages.
Commercial and industrial sales involve utilities re-building the electrical grid to handle growth in renewable energy backup, renewable power sources to health care institutions and continuous process industry plants needing 24/7 power, no matter what.
Generac projects the market for generators will grow from $14 billion to $73 billion by 2025.
The company is no slouch at adapting to the 2.0 grid system as renewable energy and energy storage make up greater proportions of power.
Twenty-eight acquisitions have been made since 2011 with three since early 2022.
Many of the acquisitions involve companies with new technology in renewable energy storage and control systems.
Financial statements for the first six months of this year show a 28 per cent slump in sales and 72 per cent reduction in net profits.
The stock price, currently $103.22 US, is near bottom and four dollars less than the 2023 high.
Analysts’ price estimates on Yahoo Finance range between $75 and $179, with a $139 average,
The price has been falling since August when the sales slump was announced but shares still trade at an amazingly high 40 times earnings — indicating current investors believe profits will rebound within the next year.
On the charts, the stock is well below the 50-day average and 200-day averages in a falling pattern.
If an investor believes severe weather will continue disrupting power and rapid expansion of renewable energy sources will spur demand for portable residential and stationary industrial generators this stock seems to fit the bill.
Put it on the watch list for now. The price is too high until technical indicators and fundamentals shows the price is no longer in a falling mode
CAUTION: Remember when investing, consult your adviser and do your homework before buying any security. Bizworld does not recommend investments.
Ron Walter can be reached at ronjoy@sasktel.net
The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.
