By Mill Chart
Last update: Aug 19, 2025
NEXTRACKER INC-CL A (NASDAQ:NXT) has appeared as a noteworthy candidate through a systematic value investing screening process. This approach, based on the principles established by Benjamin Graham and later improved by investors like Warren Buffett, seeks to find securities trading below their intrinsic value while maintaining sound underlying fundamentals. The methodology used here specifically focuses on companies showing strong valuation metrics, scoring above 7 on our proprietary rating scale, while also showing good performance in profitability, financial health, and growth dimensions. This multi-faceted screening helps reduce the risk of value traps by confirming that seemingly low valuations are backed by operational strength and sustainable business models.
Valuation Metrics Signal Undervaluation The foundation of any value investment thesis lies in valuation, and NXT presents a noteworthy case with a valuation rating of 7. Trading at a Price/Earnings ratio of 15.21, the company stands much cheaper than 89% of its peers in the electrical equipment industry. More importantly, its Enterprise Value to EBITDA and Price/Free Cash Flow ratios indicate it is undervalued relative to 85% and 88% of industry competitors respectively. These metrics suggest the market may be missing the company's true worth, creating a possible opening for investors seeking mispriced assets. When compared against the S&P 500's average P/E ratio of 26.82, NXT's valuation looks especially attractive, offering what value investors would describe as a margin of safety, that crucial buffer between market price and intrinsic value that protects against estimation errors.
Profitability Excellence Supports Business Quality Beyond just cheapness, value investing requires proof of high-quality operations, and NXT delivers excellent profitability with a rating of 9. The company shows outstanding returns on assets (16.07%), equity (30.14%), and invested capital (22.81%), doing better than approximately 96-98% of industry peers across these metrics. Its profit margin of 17.55% and operating margin of 21.47% similarly rank in the top tier of the sector. These figures are especially notable as they've shown steady improvement over recent years, indicating management's effective capital allocation and operational efficiency. For value investors, such profitability metrics lower the risk that apparent undervaluation simply reflects a worsening business, instead suggesting the market may be undervaluing a genuinely superior operation.
Financial Health Provides Stability Foundation With a financial health rating of 8, NXT shows the balance sheet strength that value investors prioritize. The company operates with no outstanding debt, an exceptional position that removes interest expense risk and offers flexibility during economic uncertainty. Its current ratio of 2.16 and quick ratio of 1.94 indicate strong liquidity to meet short-term obligations, doing better than 63% and 75% of industry peers respectively. The Altman-Z score of 4.79 further confirms financial stability, well above the threshold indicating bankruptcy risk. This combination of zero debt and strong liquidity creates a defensive characteristic that fits perfectly with value investing's emphasis on capital preservation, particularly important given the current economic environment where interest rates remain high.
Growth Trajectory Supports Value Realization Perhaps most unusually for a value candidate, NXT shows solid growth characteristics with a rating of 8. Revenue has grown at an impressive 20.37% average annual rate over recent years, with the most recent year showing 13.26% growth. Even more remarkably, earnings per share has grown at a 32.95% average annual pace, including 27.14% growth in the past year. While future growth estimates moderate to still-good levels (8.20% EPS growth and 11.34% revenue growth annually), this historical performance indicates the company operates in a growing market rather than a declining one. For value investors, this growth component helps answer the constant challenge of when, or if, the market will recognize the undervaluation, as maintained growth increases the likelihood that intrinsic value will continue to grow.
The coming together of these factors, attractive valuation, excellent profitability, sound financial health, and solid growth, makes NXT a rare find that meets both traditional value criteria and quality growth characteristics. This combination possibly offers the best of both worlds: the margin of safety sought by value investors along with the business momentum that drives price appreciation.
For investors interested in finding similar opportunities, our Decent Value Stocks screen systematically identifies companies showing this strong combination of value and quality characteristics.
Disclaimer: This analysis is provided for informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any securities. Investors should conduct their own research and consult with a qualified financial advisor before making investment decisions.
67.7
+7.12 (+11.75%)
Find more stocks in the Stock Screener