NEXTRACKER INC-CL A (NASDAQ:NXT): An Affordable Growth Stock with Strong Fundamentals in Renewable Energy

Investors looking for growth opportunities at fair prices often consider the "Affordable Growth" strategy, which focuses on companies with strong growth potential but without high overvaluation. This method balances fundamental strength, profitability, and price to find stocks capable of delivering steady returns. The strategy selects stocks with a Growth Rating above 7, indicating strong revenue and earnings growth, while also requiring solid Profitability and Health Ratings to confirm financial stability. Importantly, the Valuation Rating must be above 5, ensuring the stock is not overpriced compared to its fundamentals.

One example that meets these criteria is NEXTRACKER INC-CL A (NASDAQ:NXT), a company offering solar tracking and software solutions for large-scale solar projects. Its fundamental analysis report explains why it stands out as an affordable growth stock.

Growth: Consistent Historical and Future Expansion

NXT’s Growth Rating of 7 reflects its strong past performance and positive future prospects:

• Earnings Per Share (EPS) increased by 27.14% over the last year, with a three-year average annual growth rate of 32.95%.
• Revenue rose by 18.38% in the past year and has grown at an average of 20.37% annually over three years.
• While future EPS growth is estimated to slow to 3.13%, revenue is expected to grow at 9.87% per year.

This mix of past success and ongoing growth makes NXT a strong growth pick, especially in the renewable energy sector, where demand for solar solutions is increasing.

Valuation: Competitive Compared to Industry and Market

Despite its growth, NXT remains fairly priced, with a Valuation Rating of 7:

• Its Price/Earnings (P/E) ratio of 14.58 is much lower than the industry average (43.99) and the S&P 500 (27.91).
• The Forward P/E of 14.79 is also better than peers, with NXT trading below 87% of its industry.
• The Enterprise Value/EBITDA and Price/Free Cash Flow metrics further show its lower pricing relative to competitors.

For growth investors, this means NXT provides a good opportunity without the high cost often linked to fast-growing stocks.

Profitability and Health: A Stable Base

Beyond growth and valuation, NXT performs well in financial strength and efficiency:

• Profitability Rating (9/10): The company has top-tier margins, including a Return on Equity (ROE) of 31.27% and an Operating Margin of 21.65%, beating nearly 99% of peers.
• Health Rating (8/10): With no debt, a strong Altman-Z score of 4.57, and good liquidity ratios, NXT’s financial position is secure, lowering risk.

These factors support the "Affordable Growth" idea by ensuring the company can maintain its growth without financial stress.

Why These Criteria Are Important

The Affordable Growth strategy focuses on companies that are growing, financially stable, and fairly priced. Overpriced growth stocks often drop sharply if earnings disappoint, while poor profitability or high debt can harm even promising businesses. NXT’s mix of strong growth, solid fundamentals, and fair pricing makes it a balanced choice for investors looking for exposure to the renewable energy sector.

For more details on NXT’s fundamentals, see the full fundamental analysis report.

Want to find more stocks like this? Check out other Affordable Growth options using our stock screener.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research or consult a financial advisor before making decisions.