Generac Holdings - Aggressive Growth

Generac Holdings Inc. (GNRC) is coming off of a solid quarterly report that sent estimates higher. Analysts see a bright future for this relatively new stock.

If you are looking for a late-cycle mover, this Zacks #1 Rank (Strong Buy) is a good option.

Company Description

Generac makes backup power generators for residential, light commercial and industrial markets. Their products are distributed through independent dealers, retailers and wholesalers.

Income Jumps 27%

On Feb 18 Generac reported fourth-quarter results. Net sales rose 4.6% over the same period a year ago, to $161 million. Adjusted net income came in at $33.0 million, up 27.2% over the prior year.

Earnings per share was $0.49, which was well ahead of the $0.34 that analysts were looking for. Generac has topped forecasts in each of the 4 quarters since it went public about a year ago.

Estimates Move Higher

While the company gave a modest outlook, it did not stop analysts from raising their full-year targets. The Zacks Consensus Estimate for this year is up 42 cents, to $1.84. Next year’s estimates rose 62 cents to average $2.09. Since the company just went public there isn’t a growth rate for this year, but 2012’s would be 14%.

Valuations are attractive here. The forward P/E is just under 10 times. Given the 12.5% long-term growth rate, the PEG ratio is just 0.8 times.

Cyclical Play

Generac is in an industry that is one of the last to recover in a recession. Throwing down thousands of dollars on a home investment is not exactly in the cards for many homeowners right now many. But as this recovery continues, look for GNRC to be rewarded with plenty of pent up demand.

The Chart

Shares of GNRC popped on the earnings surprise and have managed to build on those gains in a touch market. The volatility has calmed down in the couple days and should make for an easy entry point here.

Generac Holdings Inc. - ticker GNRC> <P ALIGN=