Batten Down the Hatches for a Generac Holdings Inc. (GNRC) SWOT Analysis

Threats

• Free cash flow as a percentage of adjusted net income has been dropping from 97% in 2012 to 88% so far in 2013. However, the company believes this is quite strong enough to service debt. Interest expense on that debt has doubled from $23.7 million in 2011 to $49 million in 2012.

• Competitor Briggs & Stratton Corporation (NYSE:BGG) is already in 100 countries on 6 continents. It also has a backup income stream from its outdoor power equipment, snow blowers, lawn care equipment and such. It also has a fifty year headstart on Generac Holdings Inc. (NYSE:GNRC). But its last earnings release was quite disappointing with an 11% drop in net income.

• Briggs & Stratton is strong in Brazil, Generac’s newest market, and this was a lone bright spot for their Q3 earnings.

• Cummins Inc. (NYSE:CMI), the huge diversified industrial machinery company, has a lower trailing P/E at 15.38 than Generac’s 24.67 and the troubling 92.49 P/E for Briggs & Stratton Corporation (NYSE:BGG). However, Generac Holdings Inc. (NYSE:GNRC)’s PEG at 1.12 is the lowest with the most growth ahead.

Time to power up

Generac is still a great name to buy into the extreme weather season.  Its generous special dividends are better than the regular dividends of Cummins Inc. (NYSE:CMI) at 1.70% and Briggs & Stratton Corporation (NYSE:BGG) at 2.10%. Its growth rate is better and it has a very bright future internationally. Before another tragic storm hits, get a generator and buy Generac.

AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool recommends Cummins. The Motley Fool owns shares of Cummins and Generac Holdings.

The article Batten Down the Hatches for a Generac SWOT Analysis originally appeared on Fool.com.

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