The past six months have been a windfall for Nextracker’s shareholders. The company’s stock price has jumped 71.6%, hitting $61 per share. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now still a good time to buy NXT? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why Is NXT a Good Business?
With its technology playing a key role in the massive 1.2 gigawatt Noor Abu Dhabi solar farm project, Nextracker (NASDAQ:NXT) is a provider of solar tracker systems that help solar panels follow the sun.
1. Surging Backlog Locks In Future Sales
In addition to reported revenue, backlog is a useful data point for analyzing Renewable Energy companies. This metric shows the value of outstanding orders that have not yet been executed or delivered, giving visibility into Nextracker’s future revenue streams.
Nextracker’s backlog punched in at $4.92 billion in the latest quarter, and over the last two years, its year-on-year growth averaged 46.5%. This performance was fantastic and shows the company has a robust sales pipeline because it is accumulating more orders than it can fulfill. Its growth also suggests that customers are committing to Nextracker for the long term, enhancing the business’s predictability. 
2. Increasing Free Cash Flow Margin Juices Financials
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Nextracker’s margin expanded by 13.6 percentage points over the last five years. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Nextracker’s free cash flow margin for the trailing 12 months was 21%.
3. New Investments Bear Fruit as ROIC Jumps
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Nextracker’s ROIC has increased significantly over the last few years. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.
Final Judgment
These are just a few reasons why we think Nextracker is one of the best industrials companies out there, and after the recent surge, the stock trades at 15.6× forward P/E (or $61 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.
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