Nextpower (NXT 2.32%) stock has risen 131% over the past year. That said, the stock is currently down more than 11% from its 52-week high. With the stock having slipped below $100 per share, is it time to buy this solar power business? There are good reasons to jump aboard, and one notable reason to stay on the sidelines.
What does Nextpower do?
Nextpower provides products and services to the renewable power industry. The technology that underpins its business enables solar panels to track the sun's movement. This is very valuable to customers because it increases the amount of electricity solar panels generate, thereby boosting returns on investment.
Image source: Getty Images.
Roughly 90% of the revenue on the company's income statement is tied to its solar-tracking technology. While highly focused, this isn't inherently a bad thing. Notably, the company's backlog of work stood at roughly $5 billion at the end of the second quarter of fiscal 2026. With projected fiscal 2026 revenue of roughly $3.5 billion, it appears the company has more than a year of work lined up. Most of that work is going to come from its core solar tracking technology.
There's even more positive news if you look at the company's balance sheet. At the end of the fiscal second quarter of 2026, Nextpower had no long-term debt and a cash balance of roughly $845 million. To say that it is in a good financial position would be an understatement. It is operating on a rock-solid foundation.
Meanwhile, the stock's valuation doesn't seem outlandish. Nextpower's price-to-sales ratio is 3.9, below its five-year average of 4.4. Its price-to-earnings ratio is 23, below its five-year average of 26. For reference, the average P/E for the S&P 500 index (^GSPC 0.06%) is 28. For a company with a solid pipeline of work ahead of it, and no debt, Nextpower seems fairly reasonably priced.
The big risk is Nextpower's growth plan
Between fiscal 2026 and fiscal 2030, Nextpower expects to grow its revenue from $3.4 billion to $5.2 billion. That's an interesting opportunity for investors, but there's one small issue to consider before you buy into what appears to be a fairly low-risk growth stock.
Nextpower's overall sales are projected to grow by more than 50%. However, the sun-tracking business is expected to grow its revenue by only 20% between 2026 and 2030. The rest of the growth is going to be driven by what are largely new businesses.
NASDAQ: NXT
Key Data Points
The new businesses are adjacent to the company's current product and service offerings. Management isn't taking on excessive risk by entering entirely new markets. However, the plan is for the new businesses to drive growth, pushing the sun-tracking technology from roughly 90% of the top line to just around 70% by fiscal 2030. Execution will be vital to monitor as Nextpower looks to broaden its business. Wall Street is likely to be displeased if it falls short of its growth goals, and success in new businesses will be the main driver of growth over the next few years.
Not a bad risk/reward balance
Nextpower has the financial strength to withstand some business missteps. So the risk here may not be quite as big as it seems. However, conservative investors need to recognize how heavily the company is relying on its new business lines to support its long-term growth projections. Even though the company is operating a financially strong and profitable business, conservative investors might want to stay on the sidelines. Those willing to make the leap of faith, meanwhile, should pay very close attention to how well the company executes its growth plans.
