ENPH Stock -- What's In It For Investors?

We've been asking ourselves recently if the market has placed a fair valuation on Enphase Energy. Let's dive into some of the fundamental values of this large-cap Technology company to determine if there might be an opportunity here for value-minded investors.

The Market May Be Overvaluing Enphase Energy's Earnings and Assets:

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 belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 27.16 and an average price to book (P/B) ratio of 6.23. In contrast, Enphase Energy has a trailing 12 month P/E ratio of 49.3 and a P/B ratio of 22.55.

Enphase Energy's PEG ratio is 1.51, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.

An Exceptionally Strong Balance Sheet:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $624 $774 $1,382 $2,331
Gross Margins 35.4% 44.7% 40.1% 41.8%
Operating Margins 16.9% 24.1% 15.6% 19.3%
Net Margins 25.81% 17.3% 10.52% 17.05%
Net Income (MM) $161 $134 $145 $397
Net Interest Expense (MM) -7 -19 -44 4
Net Interest Expense (MM) -$7 -$19 -$44 $4
Depreciation & Amort. (MM) -$14 -$17 -$32 -$59
Earnings Per Share $1.23 $0.95 $1.02 $3.24
EPS Growth n/a -22.76% 7.37% 217.65%
Diluted Shares (MM) 132 142 143 137
Free Cash Flow (MM) $124 $196 $300 $698
Capital Expenditures (MM) -$15 -$21 -$53 -$46
Net Current Assets (MM) $59 $217 -$187 $6
Current Ratio 2.51 1.75 3.33 3.55
Long Term Debt (MM) $103 $5 $952 $1,199
Net Debt / EBITDA -1.31 -2.24 4.64 1.59

Enphase Energy benefits from growing revenues and increasing reinvestment in the business, exceptional EPS growth, and a pattern of improving cash flows. The company's financial statements show an excellent current ratio and healthy leverage. However, the firm has slimmer gross margins than its peers. Finally, we note that Enphase Energy has weak operating margings with a stable trend.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.