Intrinsic value of Generac Holdlings Inc. - GNRC

Previous Close

$56.50

  Intrinsic Value

$125.99

stock screener

  Rating & Target

str. buy

+123%

Previous close

$56.50

 
Intrinsic value

$125.99

 
Up/down potential

+123%

 
Rating

str. buy

We calculate the intrinsic value of GNRC stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 3.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  14.70
  13.73
  12.86
  12.07
  11.36
  10.73
  10.15
  9.64
  9.18
  8.76
  8.38
  8.04
  7.74
  7.47
  7.22
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
  5.63
  5.56
  5.51
  5.46
Revenue, $m
  2,320
  2,639
  2,978
  3,338
  3,717
  4,116
  4,534
  4,971
  5,427
  5,902
  6,397
  6,912
  7,446
  8,002
  8,580
  9,180
  9,804
  10,453
  11,128
  11,830
  12,561
  13,323
  14,116
  14,943
  15,806
  16,707
  17,647
  18,628
  19,654
  20,727
Variable operating expenses, $m
  1,589
  1,793
  2,010
  2,241
  2,484
  2,739
  3,007
  3,288
  3,580
  3,885
  4,101
  4,430
  4,773
  5,130
  5,500
  5,885
  6,285
  6,701
  7,133
  7,584
  8,052
  8,540
  9,049
  9,579
  10,132
  10,709
  11,312
  11,941
  12,599
  13,287
Fixed operating expenses, $m
  280
  286
  292
  299
  305
  312
  319
  326
  333
  341
  348
  356
  364
  372
  380
  388
  397
  405
  414
  423
  433
  442
  452
  462
  472
  482
  493
  504
  515
  526
Total operating expenses, $m
  1,869
  2,079
  2,302
  2,540
  2,789
  3,051
  3,326
  3,614
  3,913
  4,226
  4,449
  4,786
  5,137
  5,502
  5,880
  6,273
  6,682
  7,106
  7,547
  8,007
  8,485
  8,982
  9,501
  10,041
  10,604
  11,191
  11,805
  12,445
  13,114
  13,813
Operating income, $m
  452
  560
  676
  798
  928
  1,064
  1,207
  1,357
  1,514
  1,677
  1,948
  2,125
  2,310
  2,501
  2,700
  2,907
  3,123
  3,347
  3,580
  3,823
  4,077
  4,340
  4,615
  4,902
  5,202
  5,515
  5,842
  6,183
  6,540
  6,914
EBITDA, $m
  586
  698
  819
  946
  1,081
  1,223
  1,373
  1,529
  1,692
  1,862
  2,039
  2,223
  2,415
  2,614
  2,822
  3,037
  3,262
  3,495
  3,738
  3,991
  4,254
  4,529
  4,815
  5,114
  5,425
  5,751
  6,091
  6,447
  6,818
  7,207
Interest expense (income), $m
  42
  50
  63
  77
  92
  108
  125
  143
  162
  181
  201
  222
  244
  267
  291
  316
  342
  368
  396
  425
  455
  486
  519
  553
  588
  625
  663
  703
  745
  789
  834
Earnings before tax, $m
  402
  497
  598
  706
  819
  939
  1,064
  1,196
  1,333
  1,476
  1,726
  1,881
  2,042
  2,210
  2,384
  2,566
  2,755
  2,951
  3,156
  3,368
  3,590
  3,822
  4,063
  4,315
  4,577
  4,852
  5,139
  5,438
  5,752
  6,080
Tax expense, $m
  109
  134
  162
  191
  221
  253
  287
  323
  360
  398
  466
  508
  551
  597
  644
  693
  744
  797
  852
  909
  969
  1,032
  1,097
  1,165
  1,236
  1,310
  1,387
  1,468
  1,553
  1,642
Net income, $m
  293
  363
  437
  515
  598
  685
  777
  873
  973
  1,077
  1,260
  1,373
  1,491
  1,613
  1,741
  1,873
  2,011
  2,154
  2,304
  2,459
  2,621
  2,790
  2,966
  3,150
  3,341
  3,542
  3,751
  3,970
  4,199
  4,438

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  2,782
  3,164
  3,571
  4,002
  4,457
  4,935
  5,436
  5,960
  6,507
  7,077
  7,670
  8,287
  8,929
  9,595
  10,288
  11,008
  11,756
  12,534
  13,343
  14,185
  15,062
  15,975
  16,926
  17,918
  18,952
  20,032
  21,159
  22,336
  23,566
  24,852
Adjusted assets (=assets-cash), $m
  2,782
  3,164
  3,571
  4,002
  4,457
  4,935
  5,436
  5,960
  6,507
  7,077
  7,670
  8,287
  8,929
  9,595
  10,288
  11,008
  11,756
  12,534
  13,343
  14,185
  15,062
  15,975
  16,926
  17,918
  18,952
  20,032
  21,159
  22,336
  23,566
  24,852
Revenue / Adjusted assets
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
  0.834
Average production assets, $m
  856
  974
  1,099
  1,232
  1,372
  1,519
  1,673
  1,834
  2,003
  2,178
  2,360
  2,550
  2,748
  2,953
  3,166
  3,388
  3,618
  3,857
  4,106
  4,365
  4,635
  4,916
  5,209
  5,514
  5,832
  6,165
  6,512
  6,874
  7,252
  7,648
Working capital, $m
  439
  499
  563
  631
  703
  778
  857
  939
  1,026
  1,116
  1,209
  1,306
  1,407
  1,512
  1,622
  1,735
  1,853
  1,976
  2,103
  2,236
  2,374
  2,518
  2,668
  2,824
  2,987
  3,158
  3,335
  3,521
  3,715
  3,917
Total debt, $m
  1,170
  1,432
  1,712
  2,008
  2,320
  2,649
  2,993
  3,353
  3,729
  4,120
  4,528
  4,952
  5,392
  5,850
  6,326
  6,821
  7,335
  7,869
  8,425
  9,003
  9,606
  10,233
  10,886
  11,568
  12,278
  13,020
  13,794
  14,603
  15,448
  16,332
Total liabilities, $m
  1,911
  2,174
  2,453
  2,749
  3,062
  3,390
  3,735
  4,095
  4,470
  4,862
  5,269
  5,693
  6,134
  6,592
  7,068
  7,562
  8,076
  8,611
  9,167
  9,745
  10,347
  10,975
  11,628
  12,309
  13,020
  13,762
  14,536
  15,345
  16,190
  17,074
Total equity, $m
  871
  990
  1,118
  1,253
  1,395
  1,545
  1,702
  1,866
  2,037
  2,215
  2,401
  2,594
  2,795
  3,003
  3,220
  3,445
  3,680
  3,923
  4,176
  4,440
  4,714
  5,000
  5,298
  5,608
  5,932
  6,270
  6,623
  6,991
  7,376
  7,779
Total liabilities and equity, $m
  2,782
  3,164
  3,571
  4,002
  4,457
  4,935
  5,437
  5,961
  6,507
  7,077
  7,670
  8,287
  8,929
  9,595
  10,288
  11,007
  11,756
  12,534
  13,343
  14,185
  15,061
  15,975
  16,926
  17,917
  18,952
  20,032
  21,159
  22,336
  23,566
  24,853
Debt-to-equity ratio
  1.340
  1.450
  1.530
  1.600
  1.660
  1.710
  1.760
  1.800
  1.830
  1.860
  1.890
  1.910
  1.930
  1.950
  1.960
  1.980
  1.990
  2.010
  2.020
  2.030
  2.040
  2.050
  2.050
  2.060
  2.070
  2.080
  2.080
  2.090
  2.090
  2.100
Adjusted equity ratio
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  293
  363
  437
  515
  598
  685
  777
  873
  973
  1,077
  1,260
  1,373
  1,491
  1,613
  1,741
  1,873
  2,011
  2,154
  2,304
  2,459
  2,621
  2,790
  2,966
  3,150
  3,341
  3,542
  3,751
  3,970
  4,199
  4,438
Depreciation, amort., depletion, $m
  134
  138
  143
  148
  154
  159
  165
  171
  178
  185
  90
  98
  105
  113
  121
  130
  139
  148
  157
  167
  178
  188
  200
  211
  223
  236
  249
  263
  278
  293
Funds from operations, $m
  427
  501
  580
  663
  752
  845
  942
  1,044
  1,151
  1,262
  1,350
  1,471
  1,596
  1,726
  1,862
  2,003
  2,149
  2,302
  2,461
  2,626
  2,799
  2,978
  3,165
  3,361
  3,565
  3,778
  4,001
  4,233
  4,477
  4,731
Change in working capital, $m
  56
  60
  64
  68
  72
  75
  79
  83
  86
  90
  94
  97
  101
  105
  109
  113
  118
  123
  128
  133
  138
  144
  150
  156
  163
  170
  178
  186
  194
  203
Cash from operations, $m
  371
  441
  516
  596
  680
  769
  863
  962
  1,064
  1,172
  1,257
  1,373
  1,495
  1,621
  1,753
  1,889
  2,032
  2,179
  2,333
  2,494
  2,660
  2,834
  3,015
  3,205
  3,402
  3,608
  3,823
  4,048
  4,283
  4,529
Maintenance CAPEX, $m
  -29
  -33
  -37
  -42
  -47
  -53
  -58
  -64
  -70
  -77
  -83
  -90
  -98
  -105
  -113
  -121
  -130
  -139
  -148
  -157
  -167
  -178
  -188
  -200
  -211
  -223
  -236
  -249
  -263
  -278
New CAPEX, $m
  -109
  -118
  -125
  -133
  -140
  -147
  -154
  -161
  -168
  -175
  -183
  -190
  -197
  -205
  -213
  -222
  -230
  -239
  -249
  -259
  -270
  -281
  -293
  -305
  -318
  -332
  -347
  -362
  -379
  -396
Cash from investing activities, $m
  -138
  -151
  -162
  -175
  -187
  -200
  -212
  -225
  -238
  -252
  -266
  -280
  -295
  -310
  -326
  -343
  -360
  -378
  -397
  -416
  -437
  -459
  -481
  -505
  -529
  -555
  -583
  -611
  -642
  -674
Free cash flow, $m
  233
  291
  353
  421
  493
  570
  651
  736
  826
  920
  991
  1,093
  1,200
  1,311
  1,426
  1,547
  1,671
  1,801
  1,936
  2,077
  2,223
  2,376
  2,534
  2,700
  2,872
  3,052
  3,240
  3,436
  3,641
  3,855
Issuance/(repayment) of debt, $m
  246
  262
  279
  296
  312
  328
  344
  360
  376
  392
  408
  424
  441
  458
  476
  495
  514
  534
  556
  578
  602
  627
  654
  681
  711
  742
  774
  809
  845
  883
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  246
  262
  279
  296
  312
  328
  344
  360
  376
  392
  408
  424
  441
  458
  476
  495
  514
  534
  556
  578
  602
  627
  654
  681
  711
  742
  774
  809
  845
  883
Total cash flow (excl. dividends), $m
  479
  553
  633
  717
  805
  898
  995
  1,096
  1,202
  1,311
  1,398
  1,517
  1,640
  1,769
  1,902
  2,041
  2,186
  2,336
  2,492
  2,656
  2,826
  3,003
  3,188
  3,381
  3,583
  3,794
  4,014
  4,245
  4,486
  4,739
Retained Cash Flow (-), $m
  -110
  -120
  -127
  -135
  -142
  -150
  -157
  -164
  -171
  -178
  -186
  -193
  -201
  -209
  -217
  -225
  -234
  -244
  -253
  -264
  -274
  -286
  -298
  -310
  -324
  -338
  -353
  -368
  -385
  -403
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  368
  433
  505
  582
  663
  748
  838
  932
  1,030
  1,133
  1,213
  1,324
  1,440
  1,560
  1,685
  1,816
  1,951
  2,092
  2,239
  2,392
  2,551
  2,717
  2,890
  3,071
  3,259
  3,456
  3,661
  3,876
  4,101
  4,336
Discount rate, %
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
  348
  384
  417
  445
  466
  481
  488
  487
  480
  465
  435
  410
  381
  348
  313
  277
  241
  206
  173
  142
  115
  91
  70
  53
  39
  28
  20
  14
  9
  6
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Generac Holdings Inc. (Generac) is a designer and manufacturer of power generation equipment and other engine powered products. The Company serves the residential, light commercial, industrial, oil and gas, and construction markets. Its segments include Domestic and International. The Domestic segment includes the Generac business. The International segment includes the Ottomotores UK, Tower Light SRL and PR Industrial S.r.l acquisitions. It designs and manufactures light towers, which provide temporary lighting for various end markets; commercial and industrial mobile heaters used in the oil and gas, construction and other industrial markets, and a product line of outdoor power equipment for residential and commercial use. It designs, manufactures, sources and modifies engines, alternators, transfer switches and other components necessary for its products. It classifies products into three categories: Residential products, Commercial & Industrial products, and Other products.

FINANCIAL RATIOS  of  Generac Holdlings Inc. (GNRC)

Valuation Ratios
P/E Ratio 35.8
Price to Sales 2.5
Price to Book 8.8
Price to Tangible Book
Price to Cash Flow 14
Price to Free Cash Flow 15.9
Growth Rates
Sales Growth Rate 9.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -3.2%
Cap. Spend. - 3 Yr. Gr. Rate -0.7%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 251.1%
Total Debt to Equity 262.6%
Interest Coverage 5
Management Effectiveness
Return On Assets 6.9%
Ret/ On Assets - 3 Yr. Avg. 7.9%
Return On Total Capital 6.7%
Ret/ On T. Cap. - 3 Yr. Avg. 7.7%
Return On Equity 22.8%
Return On Equity - 3 Yr. Avg. 27.5%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 35.6%
Gross Margin - 3 Yr. Avg. 35.3%
EBITDA Margin 17.5%
EBITDA Margin - 3 Yr. Avg. 18.6%
Operating Margin 14.1%
Oper. Margin - 3 Yr. Avg. 15.7%
Pre-Tax Margin 10.8%
Pre-Tax Margin - 3 Yr. Avg. 12.6%
Net Profit Margin 6.9%
Net Profit Margin - 3 Yr. Avg. 8.3%
Effective Tax Rate 36.5%
Eff/ Tax Rate - 3 Yr. Avg. 35.1%
Payout Ratio 0%

GNRC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GNRC stock intrinsic value calculation we used $2023 million for the last fiscal year's total revenue generated by Generac Holdlings Inc.. The default revenue input number comes from 0001 income statement of Generac Holdlings Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our GNRC stock valuation model: a) initial revenue growth rate of 14.7% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6%, whose default value for GNRC is calculated based on our internal credit rating of Generac Holdlings Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Generac Holdlings Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of GNRC stock the variable cost ratio is equal to 69.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $274 million in the base year in the intrinsic value calculation for GNRC stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Generac Holdlings Inc..

Corporate tax rate of 27% is the nominal tax rate for Generac Holdlings Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the GNRC stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for GNRC are equal to 36.9%.

Life of production assets of 26.1 years is the average useful life of capital assets used in Generac Holdlings Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for GNRC is equal to 18.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $760.549 million for Generac Holdlings Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 62.205 million for Generac Holdlings Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Generac Holdlings Inc. at the current share price and the inputted number of shares is $3.5 billion.

RELATED COMPANIES Price Int.Val. Rating
CAT Caterpillar, I 122.90 258.42  str.buy
BGG Briggs & Strat 9.82 9.37  sell
CMI Cummins Inc. 159.92 245.39  str.buy
BWXT BWX Technologi 47.80 33.08  sell
IPWR Ideal Power In 0.403 0.17  str.sell
AMOT Allied Motion 35.53 29.81  sell
FELE Franklin Elect 44.79 31.88  sell

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.