Nextracker has had an impressive run over the past six months as its shares have beaten the S&P 500 by 9.2%. The stock now trades at $46.48, marking a 21.5% gain. This was partly thanks 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 is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.

Why Is Nextracker a Good Business?

With its technology playing a key role in the massive 1.2 gigawatt Noor Abu Dabhi 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 $4.87 billion in the latest quarter, and over the last two years, its year-on-year growth averaged 56.3%. 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. Outstanding Long-Term EPS Growth

We track the change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Nextracker’s full-year EPS grew at an astounding 88.8% compounded annual growth rate over the last three years, better than the broader industrials sector.

3. Increasing Free Cash Flow Margin Juices Financials

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

As you can see below, Nextracker’s margin expanded by 12.8 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 18.2%.

Final Judgment

These are just a few reasons why Nextracker ranks near the top of our list, and with its shares beating the market recently, the stock trades at 14.1× forward price-to-earnings (or $46.48 per share). Is now a good time to initiate a position? See for yourself in our comprehensive research report, it’s free.

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