A report by SwissBear on ValueInvestorsClub provides an investment thesis for Nextracker Inc. (NASDAQ:NXT), a stock that is undervalued based on a 10.3x P/E multiple using FY25 EPS. We will summarize the bullish stance of the author in this article. NXT shares were trading at $38.65 when the valuation was done by SwissBear, vs. the closing price of $39.50 on Jan 02.
Solar panels in an agricultural field, highlighting the company’s commitment to renewable energy.
Nextracker Inc., an energy solutions company, provides solar tracker and software solutions for utility-scale and distributed generation solar projects in the United States and internationally. The US accounts for 65% of the revenue with international operations in Brazil, India, Spain and Australia.
NXT enjoys a leadership position in an oligopolistic market with a market share of 35-40% in the US. There are significant barriers to entry since financers prefer established players with a proven track record. NXT also has a 10% market share in EMEA, a market that grew by 48%. It is the third largest player in APAC, with a market share of 12% and is looking to foray into the Middle East with its first system already built in Saudi Arabia.
The recent acquisitions expand the product offering and make it a complete player. While its independent trackers have offered flexibility and cost-effectiveness, Oijo and South Pile International enable the firm to install trackers in terrains that contain bedrock or those with weak soil profiles. These features are critical for expansion since almost 25% of installations are located on bedrock and this figure is expected to increase with solar development being allowed in federal lands that are bedrock-heavy.
NXT has also diversified its supplier base in order to prevent disruption in production. Steel accounts for 80-90% of costs and the suppliers are located in close proximity, reducing transportation costs and delays. A robust supplier management has been a major reason why the gross margin has been high (28-30%). The management acknowledges a compression in 2025-26 due to competitive pricing, with the margins settling down to 22-23%.
For a firm offering tremendous growth potential in an oligopolistic market, the valuation is extremely cheap. The share is trading at 10.3x its FY25 EPS, offering a potential for double-digit return in the near future.
While we acknowledge the potential of NXT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NXT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
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