Nextracker (NXT): Is the Recent Selloff a Strategic Buying Opportunity Amid Strong Fundamentals?

The recent selloff in Nextracker (NXT) has sparked debate among investors. While the stock has underperformed broader market indices, a closer look at its valuation metrics, financial performance, and industry tailwinds suggests the decline may present a contrarian opportunity. For investors willing to look beyond short-term volatility, NXT's fundamentals and strategic positioning in the solar sector warrant a second glance.

Undervaluation: A Contrarian Lens

Nextracker's valuation metrics stand out as a compelling case for undervaluation. As of September 2025, the stock trades at a P/E ratio of 17.5x, significantly below the US Electrical industry average of 30.3x and the peer average of 37.9xNextracker (NasdaqGS:NXT) Stock Valuation, Peer...^[1]. Its EV/EBITDA ratio of 12.9x further underscores a discount relative to industry benchmarksNextracker (NasdaqGS:NXT) Stock Valuation, Peer...^[1]. While the 2025 P/B and P/S ratios (5.27 and 3.365, respectively) are within normal ranges, the stock is trading below its estimated fair value, suggesting potential mispricingNextracker (NasdaqGS:NXT) Stock Valuation, Peer...^[1].

This undervaluation contrasts sharply with Nextracker's robust financial performance. In Q3 FY2025, the company reported $679 million in revenue, a 15% year-over-year increase, and adjusted EBITDA of $186 million with a margin of 27.4%Nextracker (NasdaqGS:NXT) Stock Valuation, Peer...^[1]. Its cash reserves have surged to $693 million, and a backlog exceeding $4.5 billion positions it to capitalize on long-term demandNextracker (NasdaqGS:NXT) Stock Valuation, Peer...^[1]. These metrics suggest the market may be underappreciating Nextracker's operational strength.

Zacks Rank and Sector Dynamics

Nextracker currently holds a Zacks Rank of #3 ("Hold"), reflecting a neutral stanceNextracker (NasdaqGS:NXT) Stock Valuation, Peer...^[1]. While this rating may deter some investors, it overlooks the company's resilience in a sector facing mixed policy signals. The solar industry is navigating headwinds from the One Big Beautiful Bill Act (OBBBA), which phases out key tax credits like Section 48E and 45Y after 2027Nextracker (NasdaqGS:NXT) Stock Valuation, Peer...^[1]. However, the Inflation Reduction Act (IRA) continues to drive domestic manufacturing growth, with U.S. solar capacity surging to 40 GW by Q3 2024US Solar Market Report Highlights Solar Manufacturing Growth^[4].

Nextracker's role as a leader in utility-scale solar tracking systems—devices that optimize solar panel efficiency—positions it to benefit from this growth. The company's recent product launches, including the NX Horizon Hail Pro™ and NX Horizon-XTR™, demonstrate its innovation edgeNextracker (NasdaqGS:NXT) Stock Valuation, Peer...^[1]. Meanwhile, corporate demand for clean energy, particularly from data centers, is accelerating, with solar and wind contracts reaching 34 GW through 20242025 Power and Utilities Industry Outlook^[3].

Balancing Risks and Rewards

The selloff in NXT may reflect concerns about near-term policy uncertainty and sector-wide challenges, such as interconnection delays and labor shortagesUS Solar Market Report Highlights Solar Manufacturing Growth^[4]. However, these risks appear priced into the stock, creating a margin of safety for long-term investors. Nextracker's domestic content capabilities and R&D investments—evidenced by expanded facilities in the U.S., Brazil, and India—further insulate it from supply chain disruptionsNextracker (NasdaqGS:NXT) Stock Valuation, Peer...^[1].

Analysts project 9.9% annual revenue growth and 6.5% earnings growth through 2029US Solar Market Report Highlights Solar Manufacturing Growth^[4], aligning with the sector's long-term trajectory. Even with the OBBBA's constraints, solar is expected to account for 43 GWdc of annual installations from 2025 to 2029US Solar Market Report Highlights Solar Manufacturing Growth^[4]. Nextracker's backlog and financial flexibility position it to outperform in this environment.

Conclusion: A Case for Strategic Entry

For contrarian investors, Nextracker's selloff offers a rare alignment of undervaluation and strong fundamentals. The stock's valuation discounts appear excessive given its operational performance, innovation pipeline, and exposure to secular growth drivers. While the Zacks Rank of #3 signals caution, the company's financials and industry positioning suggest the market is underestimating its potential.

In a sector where policy shifts and macroeconomic factors dominate headlines, Nextracker's focus on utility-scale solar—a segment less sensitive to residential market fluctuations—provides a durable advantage. For those with a long-term horizon, the current discount may represent a strategic entry point to participate in the solar transition.