Since January 2025, Sunrun has been in a holding pattern, posting a small return of 3.6% while floating around $10.56.
Is there a buying opportunity in Sunrun, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Sunrun Not Exciting?
We don't have much confidence in Sunrun. Here are three reasons why RUN doesn't excite us and a stock we'd rather own.
1. Revenue Tumbling Downwards
Long-term growth is the most important, but within industrials, a stretched historical view may miss new industry trends or demand cycles. Sunrun’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 7.1% over the last two years. Sunrun isn’t alone in its struggles as the Renewable Energy industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time. 
2. New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Sunrun’s ROIC has decreased significantly over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.
3. Short Cash Runway Exposes Shareholders to Potential Dilution
As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.
Sunrun burned through $732.6 million of cash over the last year, and its $13.64 billion of debt exceeds the $978.8 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.
Unless the Sunrun’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.
We remain cautious of Sunrun until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.
Final Judgment
Sunrun isn’t a terrible business, but it isn’t one of our picks. That said, the stock currently trades at 15.1× forward EV-to-EBITDA (or $10.56 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - you can find more timely opportunities elsewhere. We’d suggest looking at one of our all-time favorite software stocks.
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