Growth expectations and perceived risk both influence what is considered a “normal” or “fair” PE ratio. Companies with faster projected earnings growth or lower risks typically justify higher PE ratios, while those facing uncertainty or sluggish growth warrant lower multiples. Therefore, looking at the industry context and peers is essential.

Generac currently trades at a PE ratio of 28.4x. When compared to the Electrical industry average of 31.0x and the peer group’s 32.5x, the company is priced at a slight discount. However, rather than simply benchmarking against these numbers, Simply Wall St calculates a proprietary “Fair Ratio.” This figure, set at 34.6x for Generac, reflects what a reasonable PE multiple would be after considering factors like future earnings growth, industry dynamics, profit margins, company size, and the overall risk profile.

The Fair Ratio is a stronger benchmark than traditional averages as it customizes the valuation to Generac’s unique fundamentals and outlook, removing much of the “noise” associated with broad comparisons.

Since Generac’s current PE of 28.4x is well below its Fair Ratio of 34.6x, this analysis indicates the stock is undervalued on an earnings basis.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1443 companies where insiders are betting big on explosive growth.

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is simply your story of Generac Holdings. You create a perspective about the company’s future, set your assumptions for key drivers like revenue and margins, and then see how these beliefs translate to a fair value.

With Narratives, your outlook is directly connected to a financial forecast and updated fair value, making your investment decision-making more transparent and tailored to you. This approach goes beyond static ratios and one-size-fits-all models, letting you test your understanding against live numbers and see in real time how new earnings reports, news, or industry trends might change your outlook.

Anyone can explore or build a Narrative on Simply Wall St’s Community page, used by millions of investors, where you can instantly compare your fair value versus the current market price, helping you decide whether it might be time to buy or sell.

For example, some Generac investors are optimistic, forecasting strong margin recovery and commercial expansion with price targets as high as $250 per share, while others are more cautious, seeing risks that lead to a $165 target. Your own Narrative shows you where you stand and why.

Do you think there’s more to the story for Generac Holdings? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include GNRC.

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