Solar power company Nextpower (NXT 1.34%) is in a great business position these days. However, management recognizes that its next stage of growth will require broadening its business scope -- and the company is moving to do just that, which is both an opportunity and a risk.
Here's what you need to know if you are thinking about buying Nextpower.
The good news about Nextpower
The company appears to be on rock-solid ground. Its balance sheet contains no long-term debt and has roughly $845 million worth of cash on it. So, not only are there no material creditors to worry about, but the company also has money to back up its plans.
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And that's not the only good news. Besides having a substantial amount of cash on hand, the company also reported a record backlog of work in the third quarter of 2025. At roughly $5 billion, that is more than a year of revenue to work through.
The business' strength lies in its well-respected solar power technology. But what it makes is fairly mundane sounding. Nextpower creates tools that help solar panels track the Sun, increasing the amount of electricity a panel generates. Right now, this technology makes up roughly 87% of revenue.
The stock's valuation appears fairly reasonable given its financial and industry positions. The price-to-earnings ratio (P/E) is around 23, which is actually lower than the 28 average P/E of the S&P 500 index. Investors would be wise to do a deep dive into Nextpower's story.
The next leg of growth is the opportunity and the risk
Nextpower's growth should come from two fronts. Between 2025 and 2030, the company expects revenue from its tracking technology to rise about 20%. That's not bad, but it is hardly exciting. Sales from this division are expected to increase from just under $3 billion to roughly $3.5 billion. At that point, that will account for 68% of the top line.
The real growth is projected to come from the rest of the company, which currently accounts for about 13% of revenue. These business lines are expected to make up 32% of the top line by 2030.
NASDAQ: NXT
Key Data Points
Those segments are all in the same general business space, including products such as frames for solar panels and inverters. For the most part, Nextpower is staying within its comfort zone and can tap into the same customer base. However, the revenue contributed by these businesses is projected to triple in size.
Overall, the story is slow and steady for the foundation of the business, with rapid growth from newer business lines. It's not a bad story, particularly given the reasonable valuation of the stock. For more-aggressive investors, Nextpower could be an attractive buy right now. However, you need to believe that it will execute its growth plans effectively.
The future boils down to execution
Management is clearly good at selling products related to solar power. However, it has long focused on its tracking technology, and it is far from clear that it can extend its strength in this niche over to other segments of the industry.
Yet that is exactly what it is counting on doing over the next five years. If it doesn't execute on this plan, investors will likely take a dim view of the solar power stock. But if management succeeds, the opportunity could be highly compelling.
Given the stock's reasonable valuation, a material increase in the size of its business could easily lead to a material increase in earnings. That, in turn, would support a rising stock price. Just be sure to watch how well Nextpower executes outside of its core tracking technology.
