r/valueinvesting
GNRC is my top value play right now
GNRC is undervalued as a key AI infrastructure play; strong C&I growth and new data center deals offset residential weakness.
- Generac is pivoting from residential to commercial/industrial sectors, with C&I revenue growing 28% YoY driven by AI data center demand.
- Recent supply agreement with a hyperscale data center operator validates its role in critical AI power infrastructure.
- Management raised full-year guidance with expanding EBITDA margins toward 19%, targeting nearly 90% EBITDA growth by 2028.
- The residential segment remains a significant headwind, potentially dragging down overall performance despite commercial gains.
- Future financial projections rely on sustained AI infrastructure spending, which may face cyclical downturns or budget cuts.
Got about $28k of my $120k portfolio sitting in Generac right now and I think most people are completely sleeping on this one.
Here's what clicked for me recently....everyone is debating which AI company wins. NVIDIA, msft, Meta, whatever.
But here is the thing they all have in common.....None of them work without power.
And right now the American power grid is struggling to keep up with the electricity demand AI data centers are creating. That challenge is not going away anytime soon.
Generac makes the backup power systems that data centers depend on. They recently signed a supply agreement with a hyperscale data center operator, and I don't think many investors fully appreciate what that could mean over the next few years.
Q1 2026 results were strong.
Revenue grew 12% to $1.06 billion.
Adjusted EPS came in at $1.80 versus consensus estimates of $1.33.
The commercial and industrial segment, where the data center opportunity sits, grew 28% year over year.
Management responded by raising full year guidance to mid-to-high teens revenue growth while EBITDA margins continue expanding toward 19%.
Then I started thinking about something that felt obvious in hindsight
A few years ago, Generac was viewed primarily as a home generator company. You thought about it when hurricanes hit Florida.
The more I looked into it, the less it felt like a generator company and the more it felt like AI infrastructure....
The residential segment remains a headwind, and I'm not pretending otherwise.... but commercial and industrial growth is accelerating fast enough to offset much of that weakness.
Management's long-term plan through 2028 targets nearly 90% EBITDA growth from current levels.
This is not a meme stock....... it's a picks-and-shovels business positioned to benefit from one of the largest infrastructure buildouts in decades.
Priced in
More than priced in at this point. Idk why anyone wouldn't look at their current multiples and buy at this level
Definitely isnt cheap for what it is. I dont know the answer offhand, but if I were looking at the data center backup angle I would see if they are using natural gas or diesel for most solutions.
it is getting noticed yes, but not really fully priced in. It may stall for few weeks at current price but for long term play it is perfect, assumption the AI rally holds.
Interesting. This was a company I saw in my main mid cap fund for years. I’ll have to build a DCF on it and see.
Thanks for sharing!
Okay, So I built out my base case but couldn't get the numbers to work. Using a bull case assumptions (which I lean more towards my base case model) (mid high double digit revenue growth) and OCF margins that taper slightly due to a maturing industry and increased competition:
||FY2026|FY2027|FY2028|FY2029|FY2030|FY2031|FY2032|
|:-|:-|:-|:-|:-|:-|:-|:-|
|Revenue ($M)|4,925.00|5,713.00|6,455.00|7,101.00|7,740.00|8,359.00|9,028.00|
| Revenue Growth (%)|17.00%|16.00%|13.00%|10.00%|9.00%|8.00%|8.00%|
|||||||||
|Operating Cash Flow ($M)|788|886|968|1,065.00|1,122.00|1,212.00|1,264.00|
| OCF Margin (%)|16.0%|15.5%|15.0%|15.0%|14.5%|14.5%|14.0%|
My DCF points to shares that are worth $159 today and $211 by FY2032.
| DCF MODEL |||||||||
|:-|:-|:-|:-|:-|:-|:-|:-|:-|
|Discount Rate: 10%|Terminal Growth Rate: 2%||||||
||Today|FY2026|FY2027|FY2028|FY2029|FY2030|FY2031|FY2032|
|Free Cash Flow ($M)||552|638|716|799|853|945|1,011.00|
|Terminal Value ($M)||||||||12,890.20|
|Enterprise Value ($M)|10,309.40|10,788.30|11,229.10|11,636.10|12,000.70|12,347.70|12,637.50|12,890.20|
|Cash + STI ($M)|341.4|459|565|681|798|910|971|1,034.00|
|Total Debt ($M)|1,215.90|1,655.00|1,683.00|1,742.00|1,864.00|1,964.00|2,060.00|2,086.00|
|Diluted Shares (M)|59.3|58|57|57|56|56|56|56|
|Equity Value ($M)|9,434.80|9,592.30|10,111.10|10,575.10|10,934.70|11,293.70|11,548.50|11,838.20|
|Intrinsic Value / Share ($)|$159.17|$165.38|$177.39|$185.53|$195.26|$201.67|$206.22|$211.40|
|Discount to Market Price (%)|67.70%|61.40%|50.50%|43.90%|36.70%|32.40%|29.50%|26.30%|
I have never posted CSV data here before so hopefully this looks alright!
At these prices, I would say the growth story is more than priced in (which I am finding fairly common for the "picks and shovels" AI plays.
If it pulls back to $105 (unlikely) I would absolutely be interested though!
Okay, So I built out my base case but couldn't get the numbers to work. Using a bull case assumptions (which I lean more towards my base case model) (mid high double digit revenue growth) and OCF margins that taper slightly due to a maturing industry and increased competition:
||FY2021|FY2022|FY2023|FY2024|FY2025|FY2026|FY2027|FY2028|FY2029|FY2030|FY2031|FY2032|
|:-|:-|:-|:-|:-|:-|:-|:-|:-|:-|:-|:-|:-|
|Revenue ($M)|3,737.20|4,564.70|4,022.70|4,295.80|4,209.10|4,925.00|5,713.00|6,455.00|7,101.00|7,740.00|8,359.00|9,028.00|
| Revenue Growth (%)||22.10%|\-11.90%|6.80%|\-2.00%|17.00%|16.00%|13.00%|10.00%|9.00%|8.00%|8.00%|
||||||||||||||
|Operating Cash Flow ($M)|411.2|58.5|521.7|741.3|438|788|886|968|1,065.00|1,122.00|1,212.00|1,264.00|
| OCF Margin (%)|11.0%|1.3%|13.0%|17.3%|10.4%|16.0%|15.5%|15.0%|15.0%|14.5%|14.5%|14.0%|
My DCF points to shares that are worth $159 today and $211 by FY2032.
|DCF MODEL |||||||||
|:-|:-|:-|:-|:-|:-|:-|:-|:-|
|Discount Rate: 10%|Terminal Growth Rate: 2%||||||
||Today|FY2026|FY2027|FY2028|FY2029|FY2030|FY2031|FY2032|
|Free Cash Flow ($M)||552|638|716|799|853|945|1,011.00|
|Terminal Value ($M)||||||||12,890.20|
|Enterprise Value ($M)|10,309.40|10,788.30|11,229.10|11,636.10|12,000.70|12,347.70|12,637.50|12,890.20|
|Cash + STI ($M)|341.4|459|565|681|798|910|971|1,034.00|
|Total Debt ($M)|1,215.90|1,655.00|1,683.00|1,742.00|1,864.00|1,964.00|2,060.00|2,086.00|
|Diluted Shares (M)|59.3|58|57|57|56|56|56|56|
|Equity Value ($M)|9,434.80|9,592.30|10,111.10|10,575.10|10,934.70|11,293.70|11,548.50|11,838.20|
|Intrinsic Value / Share ($)|$159.17|$165.38|$177.39|$185.53|$195.26|$201.67|$206.22|$211.40|
|Discount/premium to Market Price (%)|67.70%|61.40%|50.50%|43.90%|36.70%|32.40%|29.50%|26.30%|
I have never posted CSV data here before so hopefully this looks alright!
Had em at 190, sold at 220. Should have held. Sad! I like the play
I bought around April around 215 dollars and added some on may once it stared working, honestly gonna hold it as long as Ai rally stays.
I like the play sir 🫡
I'm not seeing the insider trail supporting the value-play framing. Zero open-market buys in 25 months across the entire executive and board, including the 12-month run from $130 to $290. The C-suite has sold \~$50M total: CEO Jagdfeld $24.7M (24 transactions), CFO Ragen $11.1M, CTO Forsythe $9.6M. The CEO is still actively selling on a 10b5-1 plan, most recent was $1.36M at $272 on June 1, a week ago. Plan-driven monthly sales have ratcheted from $200 in April to $260 in May to $272 in June. So the insiders are taking money off the run, not adding personal cash to it.