Today’s issue of Filthy Rich, Dirt Poor shares a long-term growth stock idea and the fundamental analysis showing how this stock could return nearly 400% to investors in the next 5 years (or sooner!).
Let me show you why this unusual solar stock could be hotter than the sun…
Understanding “Foundation” Stocks
One of my core investing ideas is to look for companies which provide a foundation to an industry, just as semiconductors (chip) stocks provide the foundation to everything electronic today, so, too, do other companies in their respective industry.
It’s no secret the world is looking for more advancements in the alternative energy space but investing in the companies which provide the consumer side can be too volatile for many.
Which brings me to Nextracker Inc., (NXT), a stock I believe belongs in growth portfolios this year (and future years).
NXT is a foundation stock, providing technology which tracks the sun’s movement across the sky. This technology increases the efficiency of solar radiation collection by solar panels (free-standing, not the rooftop version).
Let’s look at the numbers and see if NXT makes sense as an investment.
Fundamental Analysis:
NXT is a post-IPO stock, having debuted in February 2023. Unlike other IPOs in the last 12 months this stock has trended higher since its inception.
NXT is currently undervalued, trading at a 46% discount to future (1-year) earnings and sporting a 5-year Earnings Growth Rate of 37%. That puts the company in a higher tier of growth stock category for expected growth potential.
Based on current factors, that projects to a 1-year target of $79 and a 5-year target of $284, or a potential 391% return in 5-years or less.
(Traders Reserve calculator projects price in future years based on current earnings expectations, growth rates and price to earnings ratio. This is not a prediction; it is a projection.)
Current Trading Chart
On the chart, NXT broke out following earnings in late-January and is building a solid channel between $58-60 per share. As well, NXT is far off the October 2023 lows, having gained 43% in the last six months, and 86% in the last twelve months.
The sideways channel following the recent breakout suggests to me a consolidation event in advance of future earnings expectations. NXTs one year EPS growth rate is 150%, a doubling of earnings from 2023.
Owning Shares and Potential
An investor with a $100,000 portfolio using a 5% allocation would have potential long-term gains of over $19,500 (5-years) owning a reasonable number of shares (86).
Our portfolio projection model uses long-term price to determine the potential gain and risk of owning shares in the stock.
It’s not often you get a strong post-IPO stock with a great earnings outlook and a reasonable price. NXT provides both at present.
Our verdict: We like NXT as an addition to growth portfolios with a 1 to 5-year time horizon.
Remember to perform your own analysis in addition to ours!
