Nextpower Stock’s Winning Streak May Not Be Over Yet
We think Nextpower (NXT) stock might be a good investment candidate. Why? Because you get strong margin, low-debt capital structure, and strong momentum – with room to run as the stock is meaningfully below its 52-week high.
There Are Several Things In Favor Of NXT Stock
NXT is up 139% so far this year, but can still run more given its good fundamentals and the fact that it is 22% below its 52-week high.
Nextpower’s recent rebranding reflects its evolution into an integrated energy technology solution provider, including new utility-scale power conversion systems expected in 2026. This expansion, alongside securing long-term power purchase agreements and Contracts for Difference, underpins strong operating margins. Consistently strong free cash flow, exceeding $620 million annually, further supports its low-debt structure. The stock’s 129% year-to-date surge, driven by continued solar market leadership and positive FY2027 guidance with diversified revenue targets, indicates robust momentum.
And Its Fundamentals Look Good
- Long-Term Profitability: About 16.7% operating cash flow margin and 19.9% operating margin last 3-year average.
- Strong Momentum: Currently in the top 10th percentile of stocks in terms of “trend strength” – our proprietary momentum metric.
- Revenue Growth: Nextpower saw revenue growth of 20.4% LTM and 27.1% last 3-year average, but this is not a growth story
- Room To Run: Despite its momentum, NXT stock is trading 22% below its 52-week high.
Below is a quick comparison of NXT fundamentals with S&P medians.
| NXT | S&P Median | |
|---|---|---|
| Sector | Industrials | – |
| Industry | Electrical Components & Equipment | – |
| PS Ratio | 3.2 | 3.2 |
| PE Ratio | 19.0 | 23.5 |
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| LTM* Revenue Growth | 20.4% | 6.1% |
| 3Y Average Annual Revenue Growth | 27.1% | 5.4% |
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| LTM* Operating Margin | 21.1% | 18.8% |
| 3Y Average Operating Margin | 19.9% | 18.2% |
| LTM* Op Cash Flow Margin | 19.3% | 20.5% |
| 3Y Average Op Cash Flow Margin | 16.7% | 20.1% |
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| DE Ratio | 0.0% | 20.4% |
*LTM: Last Twelve Months
But Be Wary Of The Risks
While NXT stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. NXT took a hit of 68% in the Dot-Com crash, slid 64% during the 2008 meltdown, and dropped 58% in the 2022 inflation squeeze. Even the milder sell-offs, like 2018 and the Covid crash, dragged it down more than 25%. Solid fundamentals matter, but when the market shakes, this stock isn’t immune to sharp declines.
NXT Is Just One of Several Such Stocks
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We chose these stocks using the following criteria:
- Greater than $2 Bil in market cap
- High operating or (cash flow from operations) margins
- No instance of very large revenue decline in the past 5 years
- Low-debt capital structure
- Strong momentum
A portfolio that was built starting 12/31/2016 with stocks that fulfil the criteria above would have performed as follows:
- Average 12-month forward returns of nearly 15%
- 12-month win rate (percentage of picks returning positive) of about 60%
The Right Way To Invest Is Through Portfolios
Stocks can jump or crash but long term success comes from staying invested. The right portfolio helps you ride gains and cushion single stock drops
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.