Enphase Energy Inc (ENPH, Financial) is experiencing a daily loss of -2.93%, with a 3-month loss of -31.27%. Despite these losses, the company maintains an Earnings Per Share (EPS) of 3.97. The question arises: is this stock significantly undervalued? This article aims to explore the valuation analysis of Enphase Energy (ENPH) and provide a comprehensive understanding of the company's intrinsic value.
Company Overview
Enphase Energy is a global energy technology company that specializes in delivering smart, easy-to-use solutions that manage solar generation, storage, and communication on one platform. The company's microinverter technology primarily serves the rooftop solar market and produces a fully integrated solar-plus-storage solution. The majority of its revenue is derived from the United States. With a current stock price of $113.75 and a GF Value of $394.23, Enphase Energy appears to be significantly undervalued. This discrepancy between the stock price and the GF Value paves the way for a deeper exploration of the company's value.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. If a stock price is significantly above the GF Value Line, it is considered overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Currently, Enphase Energy's stock is believed to be significantly undervalued. With a market cap of $15.50 billion at its current price of $113.75 per share, the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength of Enphase Energy
Investing in companies with poor financial strength can lead to a higher risk of permanent loss. Therefore, it is crucial to understand a company's financial strength by looking at its cash-to-debt ratio and interest coverage. Enphase Energy has a cash-to-debt ratio of 1.39, which is worse than 57.96% of 904 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 of Enphase Energy
Investing in profitable companies poses less risk, especially those that have demonstrated consistent profitability over the long term. Enphase Energy, with its profitability rank of 6 out of 10, has been profitable 4 over the past 10 years. The company had a revenue of $2.80 billion and an Earnings Per Share (EPS) of $3.97 over the past twelve months. Its operating margin is 22.66%, which ranks better than 85.74% of 954 companies in the Semiconductors industry.
Growth is a vital factor in the valuation of a company. The 3-year average annual revenue growth rate of Enphase Energy is 50.4%, which ranks better than 94.16% of 874 companies in the Semiconductors industry. The 3-year average EBITDA growth rate is 60.9%, which ranks better than 86.32% of 775 companies in the Semiconductors industry.
ROIC vs WACC
Profitability of a company can also be determined by comparing its Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC). When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Enphase Energy's ROIC is 52.7, and its WACC is 12.89.
Conclusion
In conclusion, the stock of Enphase Energy Inc (ENPH, Financial) is believed to be significantly undervalued. The company's financial condition and profitability are fair, and its growth ranks better than 86.32% of 775 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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