Long-established in the Utilities - Independent Power Producers industry, Enlight Renewable Energy Ltd (ENLT, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 10.4%, juxtaposed with a three-month change of -26.53%. Fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Enlight Renewable Energy Ltd.
Understanding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 4/10
- Profitability rank: 7/10
- Growth rank: 7/10
- GF Value rank: 8/10
- Momentum rank: 0/10
Based on the above method, GuruFocus assigned Enlight Renewable Energy Ltd the GF Score of 64 out of 100, which signals poor future outperformance potential.
Enlight Renewable Energy Ltd: A Snapshot
Enlight Renewable Energy Ltd is a green energy company with a market cap of $1.51 billion. It specializes in initiating, developing, financing, constructing, managing, and operating electricity production projects involved in generating electricity from renewable energy sources. The company also provides installation services. Its segments include Photovoltaic Israel, Israel wind, Eastern Europe wind, Eastern Europe Photovoltaic, Western Europe wind energy, and Management and construction. The company generates the majority of its revenue from its Photovoltaic business in Israel and Eastern Europe.
Financial Strength Breakdown
Enlight Renewable Energy Ltd's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 2.05 positions it worse than 65.08% of 315 companies in the Utilities - Independent Power Producers industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. It's worth noting that the esteemed investor Benjamin Graham typically favored companies with an interest coverage ratio of at least five.
The company's Altman Z-Score is just 0.58, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years. Additionally, the company's low cash-to-debt ratio at 0.16 indicates a struggle in handling existing debt levels.
The company's debt-to-equity ratio is 2.06, which is worse than 78.67% of 375 companies in the Utilities - Independent Power Producers industry. A high debt-to-equity ratio suggests over-reliance on borrowing and vulnerability to market fluctuations. Additionally, the company's debt-to-Ebitda ratio is 17.58, which is above Joel Tillinghast's warning level of 4 and is worse than 89.24% of 316 companies in the Utilities - Independent Power Producers industry. Tillinghast said in his book “Big Money Think's Small: Biases, Blind Spots, and Smarter Investing” that a high debt-to-Ebitda ratio can be a red flag unless tangible assets cover the debt.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GF Score highlights Enlight Renewable Energy Ltd's unparalleled position for potential underperformance. While the company has a history of success, these indicators suggest that it may face significant challenges in the future. Investors should consider these factors when making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
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.
