Enphase Energy Inc (ENPH, Financial) has recently experienced a daily loss of 5.56%, and a modest 3-month decline of 0.8%. Despite these fluctuations, its Earnings Per Share (EPS) stands at a solid $1.92. Investors are keen to know: is the stock significantly undervalued? This article delves into the valuation analysis of Enphase Energy, inviting readers to consider the compelling evidence that follows.
Company Introduction
Enphase Energy Inc (ENPH, Financial) is a global energy technology company renowned for its pioneering solar generation, storage, and communication solutions. The company's innovative microinverter technology is primarily directed towards the rooftop solar market, offering a fully integrated solar-plus-storage solution. With the majority of its revenue stemming from the United States, Enphase Energy stands as a leading figure in the energy sector.
When assessing Enphase Energy's stock, it's imperative to compare its current price of $107.17 with the GF Value, which is an estimation of its fair value. This comparison is crucial for investors looking to gauge the stock's potential and establish a baseline for a deeper valuation analysis.
Summarize GF Value
The GF Value is an exclusive metric that captures the intrinsic value of a stock by considering historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value line serves as a benchmark for the stock's fair value, providing a target for where the stock price should ideally be.
Enphase Energy (ENPH, Financial) is currently flagged as significantly undervalued by the GF Value, hinting at a promising long-term return potential that may outpace the company's business growth. This assessment is grounded in a meticulous analysis of historical multiples, an internal adjustment based on past growth, and projections of future business performance. With the stock trading around $107.17 per share, the signs point towards a substantial undervaluation.
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Financial Strength
Investors must scrutinize a company's financial strength to avoid the risk of permanent capital loss. Key indicators such as the cash-to-debt ratio and interest coverage offer insights into the company's financial robustness. Enphase Energy has a cash-to-debt ratio of 1.25, which is modest compared to its peers in the Semiconductors industry. This results in a GuruFocus financial strength rating of 7 out of 10, reflecting a fair balance sheet.
Profitability and Growth
Long-term profitability is a less risky proposition for investors, and companies with higher profit margins are typically more attractive investments. Enphase Energy has maintained profitability over the past decade. With a revenue of $1.80 billion and an Earnings Per Share (EPS) of $1.92, the company's operating margin stands at a commendable 14.54%, outperforming 84.86% of its industry counterparts. This solid performance is reflected in a profitability rank of 8 out of 10.
The growth of a company is crucial to its valuation and long-term stock performance. Enphase Energy's 3-year average annual revenue growth rate of 43.1% is impressive, surpassing 91.89% of companies in the Semiconductors industry. Similarly, its 3-year average EBITDA growth rate of 55.1% ranks favorably within the industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) is another way to assess profitability. When ROIC exceeds WACC, it indicates the creation of shareholder value. Enphase Energy's ROIC over the past 12 months is 18.52, outpacing its WACC of 13.99, suggesting efficient value creation.
Conclusion
In summary, Enphase Energy (ENPH, Financial) appears to be significantly undervalued, with a fair financial condition and strong profitability. The company's growth outshines the majority of its peers in the Semiconductors industry. To gain a deeper understanding of Enphase Energy's financial health, interested parties can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
