What happened

Shares of power generation equipment manufacturer Generac Holdings (NYSE:GNRC) surged in Tuesday trading, up 5.5% as of 12:25 p.m. EST. The proximate cause of investors' excitement: This morning, analysts at Stifel Nicolaus raised their price target on Generac shares from $213 to $340.

But it's the reason for the rating that's the real reason to get excited today.

Rising red stock arrow representing a stock going up drawn on a yellow background

Image source: Getty Images.

So what

Stifel raised its price target because Generac's fourth-quarter earnings release last week boasted numbers "meaningfully ahead of expectations on both the top and bottom lines," reports TheFly.com, and also because Generac forecast continued momentum in the new year -- sales growth of 25% to 30%.

Last week, analysts at Canaccord Genuity, JMP Securities, JP Morgan Chase, Oppenheimer, Roth Capital, and UBS were similarly enthused, positing price targets of anywhere from $350 to $383 for the stock (which currently costs about $345). And it's not hard to see why they are so excited. In last week's report, Generac announced sales growth of 29% in its fourth quarter of 2020 -- and 76% growth in profits. This was a huge improvement over full-year results, which were already not too shabby at 13% sales growth ($2.5 billion total) and 36% profit growth ($5.48 per share).  

Now what

And 2021 could be even better. Citing strong demand for home standby generators and "solar plus storage," Generac's prediction of 25% to 30% sales growth works out to sales of at least $3.1 billion, where Wall Street was expecting only $2 billion.

Furthermore, management predicts it will earn a net profit margin of at least 15% on those sales -- so perhaps as much as $7.40 per share in profit, or 35% growth at minimum.

Investors can't help but smile at numbers like these.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.