Nextpower Stock May Have More Upside
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 is leveraging vertical integration and new electrical balance-of-systems products to enhance profitability, contributing to strong operational margins. The capital structure remains agile with negligible net debt and significant cash reserves as of FY25. A robust $5 billion order backlog fuels momentum, alongside the stock’s 119% year-to-date gain, reflecting positive market response to their updated FY26 guidance.
- How to Get Paid to Buy ORCL at a Steep Discount
- Where Could The Next Breakout for Boeing Stock Come From
- The Hidden Dangers Facing RTX Stock
- Could Freshworks Stock’s Cash Flow Spark the Next Rally?
- Caterpillar Stock On A Winning Streak: Time To Get In Or Book Profits?
- Is Newmont Stock Poised for a Rally?
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 |
|
|
||
| LTM* Revenue Growth | 20.4% | 6.0% |
| 3Y Average Annual Revenue Growth | 27.1% | 5.4% |
|
|
||
| LTM* Operating Margin | 21.1% | 18.8% |
| 3Y Average Operating Margin | 19.9% | 18.3% |
| LTM* Op Cash Flow Margin | 19.3% | 20.4% |
| 3Y Average Op Cash Flow Margin | 16.7% | 20.1% |
|
|
||
| DE Ratio | 0.0% | 21.2% |
*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
You could also check out:
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%
Portfolios Over Individual Stock Picks
Individual stocks can soar or tank but one thing matters: staying invested. The right portfolio can help you stay invested, capture upside and mitigate the downside associated with any individual stock.
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.