DCF Studio

    GNRC · NYQ · Industrials

    Generac Holdings Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 31.20

    Market price

    USD 207.44

    Implied upside

    -85.0%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Current EV/EBITDA of 27.7x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 31.20-85.0%
    Exit multiple
    USD 106.00-48.9%
    Market price
    USD 207.44

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m179m357mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 4.1bnUSD 4.0bnUSD 3.9bnUSD 3.8bnUSD 3.7bn-2.7%
    EBITUSD 423.7mUSD 412.4mUSD 401.4mUSD 390.7mUSD 380.3m-2.7%
    NOPATUSD 334.8mUSD 325.8mUSD 317.1mUSD 308.7mUSD 300.4m-2.7%
    Add depreciation & amortisationUSD 165.8mUSD 161.4mUSD 157.1mUSD 152.9mUSD 148.8m-2.7%
    Less capital expenditureUSD -126.1mUSD -122.8mUSD -119.5mUSD -116.3mUSD -113.2m-2.7%
    Less increase in working capitalUSD -17.0mUSD -16.5mUSD -16.1mUSD -15.7mUSD -15.3m-2.7%
    Free cashflow to firmUSD 357.4mUSD 347.9mUSD 338.6mUSD 329.6mUSD 320.8m-2.7%
    Discount factor0.94160.83490.74030.65640.5820-
    Present valueUSD 336.6mUSD 290.5mUSD 250.7mUSD 216.3mUSD 186.7m-13.7%
    Present Value Of The ForecastUSD 1.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.612Reported 1.913, pulled toward 1.0 (Blume)
    Cost of equity13.86%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 12.3bn89.1% of capital
    Total debtUSD 1.5bn10.9% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC12.78%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 31.20

    57% of EV

    Forecast FCFF, final year
    USD 320.8m
    Capex at depreciation, working capital in reinvestment
    USD 369.7m
    Less reinvestment at g/ROIC (19.6% of NOPAT)
    USD -72.3m
    Capitalised
    USD 297.4m
    ROIC (WACC floor)
    12.8%
    Terminal value, undiscounted
    USD 3.0bn
    Terminal value, discounted
    USD 1.7bn
    Enterprise value
    USD 3.0bn
    Less net debt
    USD 1.2bn
    Equity value
    USD 1.8bn

    Exit at 20.0x EBITDA

    Value per shareUSD 106.00

    83% of EV

    Terminal value, undiscounted
    USD 10.6bn
    Terminal value, discounted
    USD 6.2bn
    Enterprise value
    USD 7.4bn
    Less net debt
    USD 1.2bn
    Equity value
    USD 6.3bn

    Spread between methods: 109%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    10.78%40.0140.1940.3740.5540.74
    11.78%35.0735.2335.3935.5535.71
    12.78%30.9231.0631.2031.3431.49
    13.78%27.3727.5027.6227.7527.88
    14.78%24.3124.4224.5324.6524.76

    Outlined: this model. Green text: above today's price of 207.44. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year-2.7%33.8%+36.5pp
    EBIT margin10.3%51.9%+41.5pp
    Discount rate12.8%4.4%-8.3pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.