Enphase Energy Inc (ENPH, Financial) experienced a daily gain of 3.63% and a three-month loss of -33.66%. Its Earnings Per Share (EPS) stands at 3.97. The question that arises is - is the stock significantly undervalued? This article provides a valuation analysis that will help answer this question. Read on to discover more about Enphase Energy's intrinsic value.
Enphase Energy is a global energy technology company that delivers smart, easy-to-use solutions that manage solar generation, storage, and communication on one platform. The company primarily serves the rooftop solar market with its microinverter technology and produces a fully integrated solar-plus-storage solution. A majority of its revenue comes from the United States. With a market cap of $16.60 billion and sales of $2.80 billion, Enphase Energy's stock price stands at $121.41, which is significantly lower than its GF Value of $403.12.
Understanding GF Value
The GF Value represents the current intrinsic value of a stock, derived from a proprietary method. The GF Value Line provides an overview of the stock's fair trading value, calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates.
According to GuruFocus' valuation method, Enphase Energy (ENPH, Financial) is significantly undervalued. If the share price is significantly above the GF Value Line, the stock may be overvalued, and future returns may be poor. Conversely, if the share price is significantly below the GF Value Line, the stock may be undervalued, and future returns may be higher. Given Enphase Energy's current price of $121.41 per share, the stock is estimated to be significantly undervalued.
Because Enphase Energy is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth.
It is crucial to evaluate the financial strength of a company before investing in its stock. Companies with poor financial strength pose a higher risk of permanent loss. The cash-to-debt ratio and interest coverage can provide insights into a company's financial strength. Enphase Energy has a cash-to-debt ratio of 1.39, which is worse than 58.09% of 902 companies in the Semiconductors industry. However, the overall financial strength of Enphase Energy is 7 out of 10, indicating fair financial health.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors. Higher profitability margins usually dictate a better investment compared to a company with lower profit margins. Enphase Energy has been profitable 4 over the past 10 years. Over the past twelve months, the company had a revenue of $2.80 billion and Earnings Per Share (EPS) of $3.97. Its operating margin is 22.66%, which ranks better than 85.64% of 947 companies in the Semiconductors industry. Overall, the profitability of Enphase Energy is ranked 6 out of 10, indicating fair profitability.
Growth is probably the most important factor in the valuation of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Enphase Energy is 50.4%, which ranks better than 94.26% of 871 companies in the Semiconductors industry. The 3-year average EBITDA growth rate is 60.9%, which ranks better than 86.29% of 773 companies in the Semiconductors industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) and the weighted cost of capital (WACC) can provide insights into its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. Ideally, the return on invested capital should be higher than the weighted cost of capital. For the past 12 months, Enphase Energy's return on invested capital is 52.7, and its cost of capital is 12.55.
In summary, the stock of Enphase Energy (ENPH, Financial) is estimated to be significantly undervalued. The company's financial condition is fair, and its profitability is fair. Its growth ranks better than 86.29% of 773 companies in the Semiconductors industry. To learn more about Enphase Energy stock, you can check out its 30-Year Financials here.
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