Generac Holdings Inc (GNRC)

Conclusion

Generac Holdings designs and manufactures residential standby and portable generators, commercial and industrial power equipment, and energy storage systems. At a price of 188.75 USD on 9 November 2026, the company has a market capitalisation of 11.1 billion USD and an enterprise value of 12.1 billion USD.

The verdict is overvalued. The price-to-earnings ratio is 36.96 against a ten-year median of 26.53, a premium of 39.3%, and enterprise value to EBITDA is 19.11 against a median of 15.04, a premium of 27.1%. The discounted cash flow gives 88.73 USD per share at a discount rate of 14.12%. The fair value band runs from 93.53 to 140.30 USD with a midpoint of 116.92 USD, a margin of safety of -38.1% at the current price. The fair value from historical multiples is 145.10 USD. The reverse DCF implies growth of 21.4% a year, against revenue growth of 11.1% a year over five years and free cash flow per share growth of -7.4% a year over the same period.

What holds the case up is the balance sheet and cash generation: the Altman Z-score is 4.17, net debt to EBITDA is 1.49, and free cash flow conversion is 137.6% on a trailing twelve-month basis. What would break it is returns and per-share earnings: ROIC is 9.6% against a WACC of 13.0%, earnings per share have fallen at a compound rate of -24.2% over three years, and free cash flow per share has fallen at -7.4% a year over five years.

Financial health

Financial strength is green, held up by a Altman Z-score of 4.17 in the safe zone, a current ratio of 1.97 and net debt to EBITDA of 1.49. Interest coverage of 7.1 is only neutral. The Altman model was designed for manufacturers, and Generac is one, so the score applies. The quick ratio is 0.87 and debt to equity is 0.44, both as of 30 September 2026. Insolvency risk is low, about 0.7% by the estimate of the Ohlson model over one to two years, based on the balance sheet at 31 December 2025.

Earnings quality

Earnings quality is green, held up by free cash flow conversion of 94.9% over five years and 137.6% on a trailing basis. The accrual ratio is -5.2%, which means cash earnings exceed reported earnings. Stock-based compensation is 1.1% of revenue, and free cash flow after it is 363.2 million USD. The share count has fallen at a compound rate of 1.4% a year over five years, so buybacks have more than offset dilution. The Piotroski score is 6 out of 9. The Beneish M-score is not available. The company beat earnings estimates in six of the last eight quarters, with an average surprise of 16.4%. Analysts have raised next-year estimates by 19.7% over 90 days, with 15 upgrades and no downgrades in the last 30 days.

Profitability

Profitability is red, held back mainly by ROIC of 9.6% against a WACC of 13.0%, a gap that the company reports as value destroying (-3.45%). Gross margin of 39.9% is above its ten-year median of 36.0%. Operating margin of 10.4% is below its median of 14.6%, and net margin of 6.5% is below its median of 9.1%. The five-year median ROIC is 11.0%. Return on equity is 10.0%, but the DuPont split shows it rests on an equity multiplier of 2.12 and an asset turnover of 0.76, with a net margin of 3.8% at the end of 2025. Leverage therefore plays a larger role in the return than the margin does.

Growth

Growth is yellow, held up by a five-year revenue compound growth rate of 11.1% and a ten-year rate of 12.3%. Revenue has grown in eight of the last ten years. Three-year revenue has contracted at -2.7% a year. Earnings per share are the weak point: -24.2% a year over three years, -13.3% over five years, and 9.1% over ten years. Free cash flow per share has grown 7.1% a year over ten years but fallen 7.4% over five. The consensus expects next-year earnings growth of 41.1%, which the valuation has to absorb.

Valuation

Valuation is red, with the verdict overvalued and a margin of safety of -38.1%. Today's multiples sit above their ten-year medians: price-to-earnings of 36.96 against 26.53 (premium 39.3%), enterprise value to EBITDA of 19.11 against 15.04 (premium 27.1%), price to free cash flow of 26.86 against 17.96 (premium 49.6%), and price to sales of 2.41 against 1.89 (premium 27.6%). Price to book of 3.70 is at a discount of 28.3% to its median of 5.16. The discounted cash flow gives 88.73 USD per share, using a discount rate of 14.12%, a beta of 1.85 and a risk-free rate of 4.89%. The fair value band is built on fixed assumptions and is an order of magnitude, not a price target. The reverse DCF implies growth of 21.4% against five-year revenue growth of 11.1%. The company pays no dividend, so dividend yield and payout are zero.

Risks

Higher leverage or a further fall in interest coverage from 7.1 would weaken the balance sheet, which is currently the strongest part of the case. Continued ROIC below WACC would keep value leaking from each dollar invested, and further declines in earnings per share would make the premium multiples harder to justify. If the expected next-year earnings growth of 41.1% does not arrive, the premium to historical multiples would be harder to defend. The Beneish M-score and the debt maturity schedule are not available, and the analysis contains no revenue breakdown by segment. Because the discounted cash flow depends on assumed growth and a fixed discount rate, its value is sensitive to those inputs.