Nextracker (NXT) is expected to see continued growth, supported by its proprietary technology, operational enhancements, and financial strength, RBC Capital Markets said in a report Monday.

The firm initiated coverage on Nextracker with an outperform rating and a $55 price target, citing structural improvements that have led to better cost absorption and a strong balance sheet with free cash flow flexibility.

The company's TrueCapture software has demonstrated energy yield improvements, providing a key competitive advantage in the solar tracker market.

"[Nextracker] has built a track record for continued operational improvement and has made structural enhancements the past few years that are resulting in more favorable cost absorption," RBC said, adding that its leading software solution, TrueCapture, as a "significant value-add" for clients.

"We believe there is upside to FY26/27 consensus estimates and believe a valuation premium to peers is warranted given the strength of the balance sheet and [free cash flow] optionality," RBC added.

Nextracker is positioned for continued growth, supported by its market leadership, product portfolio, global supply chain, and growing backlog, RBC said. The company's scale provides operational advantages, while continued investment in research and development supports long-term innovation and cost efficiency, according to the note.

Shares of Nextracker were up 1.4% in recent trading.