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Backup power generator manufacturer Generac (GNRC) has sold off hard with the rest of growth over the last 6 months – down more than 50%. However, I believe this is a case of throwing out the baby with the bath water. That’s because GNRC is an electricity play and therefore more defensive than a surface analysis might suggest.

Consumers and businesses who want to be protected from blackouts and ensure their access to electricity have been buying GNRC generators – and will continue to do so going forward. The wealthy consumers and businesses who are GNRC’s market will continue to shell out the money for GNRC generators even in a nasty bear market and recession.

GNRC’s 2022 guidance provided three months ago bears this out. GNRC forecast 32-36% revenue growth for 2022. GNRC has been hit by inflation and supply chain issues like other manufacturers resulting in its margins being squeezed. However, GNRC’s adjusted EBITDA margin guidance of 22-23% for full-year 2022 – compared to 20.7% in 4Q21 – suggests stabilization.

GNRC also guided full-year 2022 net income margin to 13-14%. If you do the math, multiplying 2021 revenue by 34% (the midrange of their guidance), multiplying that by 13.5%, and dividing by the most recent diluted share count, you get $10.48 EPS. That’s what GNRC is guiding to for 2022. At a current share price of $235, that’s a forward multiple of 22x – a steal in my opinion.

GNRC reports 1Q22 earnings Wednesday morning.