BUSINESS
Enphase Energy, Inc., together with its subsidiaries, designs, develops, manufactures, and sells home energy solutions for the solar photovoltaic industry in the United States and internationally. The company offers semiconductor-based microinverter, which converts energy at the individual solar module level, and combines with its proprietary networking and software technologies to provide energy monitoring and control services. It also offers AC battery storage systems; Envoy communications gateway; and Enlighten cloud-based monitoring service, as well as other accessories. The company sells its solutions to solar distributors; and directly to large installers, original equipment manufacturers, strategic partners, and homeowners, as well as through its legacy product upgrade program or online store.
INVESTMENT RATING
Reflecting future returns on capital that are forecasted to be above the cost of capital, ENPH is expected to continue to be a major Value Builder.
Enphase Energy has a current Value Trend Rating of D (Negative).
The Value Trend Rating reflects inconsistent signals from PTR’s two proprietary measures of a stock’s attractiveness. Enphase Energy has a neutral Appreciation Score of 49 but a poor Power Rating of 25, resulting in the Negative Value Trend Rating.
Enphase Energy’s stock is selling below targeted value. The current stock price of $106.06 compares to targeted value 12 months forward of $128.
This neutral appreciation potential results in an appreciation score of 49 (51% of the universe has greater appreciation potential.)
Enphase Energy has a Power Rating of 25. (ENPH’s poor Power Rating indicates that it only has a higher likelihood of achieving favorable investment performance over the near to intermediate term than 25% of companies in the universe.)
Factors contributing to this poor Power Rating include: ENPH’s earnings estimates have fallen very significantly in recent months; the Semiconductor, Related Devices comparison group is in a slightly weakened position currently; and recent price action has been slightly unfavorable.
INVESTMENT PROFILE
ENPH’s financial strength is exceptional. Financial strength rating is 99.
Relative to the S&P 500 Composite, Enphase Energy Inc has significant Growth characteristics; its appeal is likely to be to Capital Gain-oriented investors; the perception is that ENPH is normal risk. Relative weaknesses include: high stock price volatility, and high earnings variability. ENPH’s valuation is high: low dividend yield, high P/E ratio, and high price/book ratio. ENPH has low market capitalization.
CURRENT SIGNALS
Enphase Energy’s current operations are eroding. Return on equity is falling, reflecting: falling asset utilization; declining pretax margin; falling tax keep rate; and falling leverage.
Enphase Energy’s current technical position is very weak. The stock price is in a 2.1 month down move. The stock has declined 16.1% from its prior high. The stock price is below its 200 day moving average which is in a downtrend.
ALERTS
Enphase Energy Inc (NASDAQ: ENPH) has recently experienced significant negative changes in fundamentals: the consensus estimate for December, 2024 decreased significantly, significant quarterly earnings deceleration occurred, and the consensus estimate for December, 2025 decreased significantly.
The stock is currently rated D.
Enphase Energy Inc (NASDAQ: ENPH) stock rose modestly by 0.9% on 5/2/24. The stock closed at $106.06. Trading volume in this advance was normal. The stock has been weak relative to the market over the last nine months and has declined -1.0% during the last week.
CASH FLOW
In 2023, Enphase Energy generated a slight increase in cash of +$82.2 million (+5%). Sources of cash were slightly larger than uses. Cash generated from 2023 EBITDA totaled +$529.3 million. Non-operating sources contributed +$60.6 million (+11% of EBITDA). Cash taxes consumed -$73.8 million (-14% of EBITDA). Re-investment in the business amounted to -$147.1 million (-28% of EBITDA). On a net basis, debt investors received -$5.9 million (-1% of EBITDA) while equity investors removed -$280.9 million (-53% of EBITDA).
Enphase Energy’s Non-operating Income, %EBITDA has exhibited little to no overall change over the period. This stability was accompanied by a downtrend for the Enphase Energy Peer Group. (Since 2020 Non-operating Income, %EBITDA has experienced very sharp improvement.) In most years, Enphase Energy was in the top quartile and lower quartile. Currently, Enphase Energy is upper quartile at +11% of EBITDA (+$60.6 million).
Enphase Energy’s Cash Taxes, %EBITDA has exhibited little to no overall change over the period. This stability was accompanied by stability for the Enphase Energy Peer Group as well. (Since 2021 Cash Taxes, %EBITDA has experienced a very sharp decline.) In most years, Enphase Energy was in the top quartile and lower quartile. Currently, Enphase Energy is lower quartile at -14% of EBITDA (-$73.8 million).
Enphase Energy’s Business Re-investment, %EBITDA has suffered a volatile overall downtrend over the period. This downtrend was accompanied by an opposite trend for the Enphase Energy Peer Group. In most years, Enphase Energy was in the third quartile and top quartile. Currently, Enphase Energy is lower quartile at -28% of EBITDA (-$147.1 million).
Enphase Energy’s Debt Investors, %EBITDA has experienced a very strong overall uptrend over the period. This improvement was accompanied by a similar trend for the Enphase Energy Peer Group. (Since 2021 Debt Investors, %EBITDA has experienced a very sharp decline.) In most years, Enphase Energy was in the lower quartile and top quartile. Currently, Enphase Energy is substantially below median at -1% of EBITDA (-$5.9 million).
Enphase Energy’s Equity Investors, %EBITDA has suffered a volatile overall downtrend over the period. This downtrend was accompanied by an opposite trend for the Enphase Energy Peer Group. In most years, Enphase Energy was in the second quartile and top quartile. Currently, Enphase Energy is above median at -53% of EBITDA (-$280.9 million).
Enphase Energy’s Change in Cash, %EBITDA has exhibited a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Enphase Energy Peer Group. (Since 2018 Change in Cash, %EBITDA has experienced a very sharp decline.) In most years, Enphase Energy was in the top quartile and second quartile. Currently, Enphase Energy is at median at +16% of EBITDA (+$82.2 million).
Enphase Energy’s Cash, %Revenue has enjoyed a very strong overall uptrend over the period. This improvement was accompanied by stability for the Enphase Energy Peer Group. (Since 2020 Cash, %Revenue has experienced a very sharp decline.) In most years, Enphase Energy was in the lower quartile and top quartile. Currently, Enphase Energy is at the upper quartile at +74%.
PROFITABILITY
Enphase Energy’s return on equity has improved very significantly since 2017. The current level is 29.9% versus the high of 495.2% and the low of -149.%.
Enphase Energy’s strong positive trend in pretax operating return significantly augmented by a very strong positive trend in non-operating factors is a significant analytical factor.
The productivity of Enphase Energy’s assets declined over the full period 2014-2024: asset turnover has suffered a very strong overall downtrend.
Enphase Energy’s pretax margin enjoyed a volatile overall uptrend over the period 2014-2024.
Non-operating factors (income taxes and financial leverage) had a very significant positive influence on return on equity.
Enphase Energy’s return on equity is upper quartile (29.9%) for the four quarters ended March, 2024.
Operating performance (pretax return on assets) is upper quartile (10.0%) reflecting asset turnover that is below median (0.57X) and upper quartile pretax margin (17.7%).
Tax “keep” rate (income tax management) is lower quartile (85.5%) resulting in after tax return on assets that is upper quartile.
Financial leverage (leverage) is upper quartile (3.50X).
GROWTH RATES
There are no significant differences between Enphase Energy’s longer term growth and growth in recent years.
Enphase Energy’s historical income statement growth has been lower than balance sheet growth. Revenue growth has fallen short of asset growth; earnings growth has fallen short of equity growth.
Annual revenue growth has been 11.8% per year.
Total asset growth has been 30.1% per year.
Annual E.P.S. growth has been 25.8% per year.
Equity growth has been 46.5% per year.
Enphase Energy’s consensus growth rate forecast (average of Wall Street analysts) is 16.7% — substantially below the average of the historical growth measures.
Relative to the Enphase Energy Peer Group, Enphase Energy’s historical growth measures are generally top quartile. Equity growth (46.5%) has been upper quartile. Total asset growth (30.1%) has been at the upper quartile. E.P.S. growth (25.8%) has been at the upper quartile. Revenue growth (11.8%) has been at the lower quartile.
Consistent with this pattern, consensus growth forecast (16.7%) is also at median.
PRICE HISTORY
Over the full time period, Enphase Energy’s stock price performance has been extremely volatile and exceptional. Between July, 2013 and May, 2024, Enphase Energy’s stock price rose +1570%; relative to the market, this was a +456% gain. Significant price moves during the period: 1) November, 2022 – October, 2023: -75%; 2) June, 2020 – January, 2021: +283%; 3) October, 2019 – February, 2020: +152%; 4) October, 2018 – August, 2019: +554%; 5) January, 2018 – June, 2018: +206%; and 6) May, 2017 – November, 2017: +282%.
TOTAL INVESTMENT RETURNS
Current annual total return performance of -33.8% is lower quartile relative to the S&P 500 Composite.
In addition to being lower quartile relative to S&P 500 Composite, current annual total return performance through April, 2024 of -33.8% is below median relative to Enphase Energy Inc Peer Group.
Current 5-year total return performance of 61.0% is upper quartile relative to the S&P 500 Composite.
Through April, 2024, with upper quartile current 5-year total return of 61.0% relative to S&P 500 Composite, Enphase Energy’s total return performance is upper quartile relative to Enphase Energy Inc Peer Group.
VALUATION BENCHMARKS
Relative to S&P 500 Composite, ENPH’s overall valuation is exceptionally high. All five factors are upper quartile. The highest factor is the price/equity ratio, followed by the ratio of enterprise value/assets, then by the ratio of enterprise value/revenue, then by the ratio of enterprise value/earnings before interest and taxes. The lowest factor is the price/earnings ratio.
Relative to Enphase Energy Peer Group, ENPH’s overall valuation is quite high. The highest factor, the price/equity ratio, is upper quartile. Ratio of enterprise value/revenue is at the upper quartile. Ratio of enterprise value/assets is upper quartile. Price/earnings ratio is at the upper quartile. The lowest factor, the ratio of enterprise value/earnings before interest and taxes, is at median.
Enphase Energy has a major value gap compared to the median valuation. For ENPH to achieve median valuation, its current ratio of enterprise value/revenue would have to fall from the current level of 8.62X to 3.86X. If ENPH’s ratio of enterprise value/revenue were to fall to 3.86X, its stock price would be lower by $-64 to $42.
For ENPH to fall to lower quartile valuation relative to the Enphase Energy Peer Group, its current ratio of enterprise value/revenue would have to fall from the current level of 8.62X to 2.05X. If ENPH’s ratio of enterprise value/revenue were to fall to 2.05X, its stock price would decline by $-88 from the current level of $106.
VALUE TARGETS
Reflecting future returns on capital that are forecasted to be above the cost of capital, ENPH is expected to continue to be a major Value Builder.
Enphase Energy’s current Price Target of $148 represents a +39% change from the current price of $106.06.
This neutral appreciation potential results in an appreciation score of 49 (51% of the universe has greater appreciation potential.)
With this neutral Appreciation Score of 49, the low Power Rating of 25 results in an Value Trend Rating of D.
Enphase Energy’s current Price Target is $148 (-57% from the 2023 Target of $341 but +39% from the 05/02/24 price of $106.06). This dramatic fall in the Target is the result of a +13% increase in the equity base and a -62% decrease in the price/equity multiple. The forecasted decline in growth has a very large negative impact on the price/equity multiple and the forecasted decline in return on equity has a very large negative impact as well. Partially offsetting these Drivers, the forecasted decline in cost of equity has a very slight positive impact.
PTR’s return on equity forecast is 50.7% — significantly below our recent forecasts. Forecasted return on equity enjoyed a dramatic, erratic increase between 2015 and 2023. The current forecast is significantly below the 2018 peak of 148%.
PTR’s growth forecast is 21.0% — significantly below our recent forecasts. Forecasted growth enjoyed a dramatic, variable increase between 2020 and 2023. The current forecast is well above the 2020 low of 13%.
PTR’s cost of equity forecast is 14.7% — in line with recent levels. Forecasted cost of equity suffered a dramatic, variable increase between 2015 and 2023. The current forecast is significantly above the 2015 low of 3.5%.
At Enphase Energy’s current price of $106.06, investors are placing a positive value of $78 on its future investments. This view is consistent with the company’s most recent performance that reflected a growth rate of 54.0% per year, and a return on equity of 60.7% versus a cost of equity of 14.9%.
PTR’s 2025 Price Target of $148 is based on these forecasts and reflects an estimated value of existing assets of $52 and a value of future investments of $95.
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