Is This the Only Alternative Energy Stock You Need to Buy? - Stocks in the News


Enphase Energy ( ENPH ) delivers micro- inverter technology for the solar industry to companies such as Renesola ( SOL ), Canadian Solar ( CSIQ ), and others in the sector.  Micro-inverters increase productivity and reliability of solar modules by converting current electricity to alternating current electricity at the individual solar module level.

While you may not have heard of 'micro-inverters' this system has actually been powering some strong growth for ENPH as of late. Consider some of the recent financials for this overlooked standout below:

2Q Financials

Enphase Energy reported total revenue for the second quarter of 2014 of $82.0 million, an increase of 41 percent compared to the second quarter of 2013, and an increase of 42 percent compared to the first quarter of 2014.  GAAP net loss for the second quarter of 2014 was $3.0 million, or a loss of $0.07 per share meeting analyst earnings expectations.

Although Enphase incurs a negative EPS, investors have to take into account the company just went public two years ago and has increasing EPS estimates for the next year. In the past 60 days, 75% of estimates have been revised higher and the current EPS consensus is expected to be $0.06 by for the next fiscal year.

"I am extremely pleased with our financial performance in the second quarter," said Kris Sennesael, CFO of Enphase Energy. "The accelerated growth in demand for our microinverter system enabled us to achieve record-breaking results in our top line performance, further increase our gross margin to a record level, and achieve another quarter of positive non-GAAP operating income."

Valuation Statistics

Market Value:   $585.15 Million
Forward P/E (fye Dec 31, 2015):   39.91
PEG (5 yr expected):   9.62
P/S(ttm):   2.15

The valuation of Enphase is to be considered a little over priced according to its forward P/E in comparison to a similar company ReneSola Ltd ( SOL ), a Zacks Ranked #1(strong buy).  Additionally, with the PEG ratio standing at 9.62, one could argue that it is a bit pricey from this perspective, though there are plenty of opportunities for this company in the near term.  

Looking at the bigger picture, the valuation statistics show a somewhat favorable pricing of the stock, but investors should be looking at the underlying purpose of the company which presents for a very promising return in the future.

Recent Performance 

As you can see, gains have been very positive in the past two years since the company went public. On the other hand, the company right now is still relatively new (established 2006), and is still in the process of covering their costs and finding a way to make a profit. 

This challenge comes with most businesses so it should be no surprise to investors that they are still posting losses.   What investors should be looking at is what the market sentiment is about the company, and clearly the market seems to value Enphase very positively due mostly to future potential growth.

Future Outlook

Accelerated growth drives another record breaking quarter was headlined in the company's 8-K earnings release.

"We expect the top line growth to further accelerate in the third quarter," stated Mr. Sennesael. "We expect revenue for the third quarter of 2014 to be within a range of $93 million to $98 million. At the midpoint of the revenue outlook range, revenue would be up 54 percent, compared to the third quarter of 2013. We expect gross margin to be within a range of 32 percent to 34 percent."

"We also expect non-GAAP operating expenses for the third quarter of 2014 to be approximately flat to up 4 percent, compared to the second quarter of 2014, as we continue to invest in the Company's growth."

Bottom Line

Investors who are looking to expand their portfolio in the alternative energy industry should look no further and look to invest in Enphase.  We currently have Enphase as a Zacks Rrank #2 (buy) due to positive earnings estimate revisions in the past 60 days and the fact that it is in the top 14% of all industries. 

Enphase provides investors with a stable product such as micro-inverters that will likely always be in demand so long as alternative energy remains in focus.  And while the stock has surged as of late, it is still an interesting pick for investors thanks to its long term outlook, and great short term earnings estimate revisions, which suggest that this stock could be the one to own in the alternative energy space right now.

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ENPHASE ENERGY (ENPH): Free Stock Analysis Report

RENESOLA LT-ADR (SOL): Free Stock Analysis Report

CANADIAN SOLAR (CSIQ): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Stocks

Referenced Stocks: ENPH , SOL , CSIQ

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