Here’s what to know beyond why Enphase Energy, Inc. (ENPH) is a trending stock
Enphase Energy (ENPH) is one of the most watched stocks by visitors to Zacks.com lately. So it might be worth looking at some of the factors that could affect the stock’s short-term performance.
Over the past month, shares of this solar technology company have returned +37.3%, compared to the +11.6% change in the Zacks S&P 500 composite. During this period, the industry Zacks Solar , of which Enphase Energy is a part, gained 44.9%. The key question now is: what could be the future direction of the title?
Although media reports or rumors of a material change in a company’s business outlook usually cause its stock to trend and result in an immediate price change, there are always certain fundamental factors that ultimately determine the buy and hold decision.
Revisions to earnings estimates
At Zacks, we prioritize evaluating change in a company’s future earnings projection over anything else. This is because we believe that the present value of its future income stream is what determines the fair value of its stock.
Our analysis is primarily based on how sell-side analysts covering the stock revise their earnings estimates to reflect the latest trading trends. When a company’s earnings estimates increase, the fair value of its stock also increases. And when the fair value of a stock is higher than its current market price, investors tend to buy the stock, causing its price to rise. For this reason, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term movements in stock prices.
For the current quarter, Enphase Energy is expected to post earnings of $1.06 per share, indicating a +76.7% change from the prior year quarter. The Zacks consensus estimate has changed by +22.8% in the last 30 days.
For the current fiscal year, the consensus earnings estimate of $4.06 indicates a change of +68.5% from the prior year. Over the last 30 days, this estimate has changed by +25.2%.
For the next fiscal year, the consensus earnings estimate of $5.03 indicates a change of +23.9% from what Enphase Energy is expected to report a year ago. Over the past month, the estimate has changed by +11.8%.
With a strong externally audited track record, our proprietary stock rating tool, Zacks Rank, provides a more conclusive picture of a stock’s price direction in the short term, as it effectively harnesses the power of earnings estimate revisions. . Due to the magnitude of the recent consensus estimate change, along with three other factors related to earnings estimates, Enphase Energy is ranked Zacks Rank #2 (Buy).
The chart below shows the evolution of the company’s consensus 12-month EPS estimate:
12 month EPS
Revenue Growth Forecasts
While a company’s earnings growth is arguably the best indicator of its financial health, nothing happens if it can’t grow its revenue. It is almost impossible for a company to increase its profits without increasing its revenue for long periods of time. Therefore, knowing the potential revenue growth of a business is crucial.
In the case of Enphase Energy, the consensus sales estimate of $615.95 million for the current quarter indicates a year-over-year change of +75.2%. Estimates of $2.25 billion and $3 billion for the current and next fiscal year indicate changes of +63% and +33%, respectively.
Latest reported results and history of surprises
Enphase Energy reported revenue of $530.2 million in the last quarter, representing a year-over-year change of +67.8%. EPS of $1.07 for the same period versus $0.53 a year ago.
Compared to Zacks’ consensus estimate of $506.57 million, reported revenue is a surprise of +4.66%. Surprise EPS was +28.92%.
The company has exceeded consensus EPS estimates in each of the past four quarters. The company has exceeded consensus earnings estimates every time during this period.
Without considering the valuation of a stock, no investment decision can be effective. Crucial to predicting a stock’s future price performance is whether its current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects.
While comparing the current values of a company’s valuation multiples, such as the price-to-earnings (P/E) ratio, the price-to-sales (P/S) ratio, and the price-to-cash flow (P/CF) ratio , along with its own historical values help determine whether its stock is fairly valued, overvalued or undervalued, comparing the company against its peers on these metrics gives a good idea of the reasonableness of the stock price .
As part of the Zacks Style Scores system, the Zacks Value Style Score (which assesses both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on.), which helps determine whether a stock is overvalued, correctly valued, or temporarily undervalued.
Enphase Energy is rated D on this front, indicating that it is trading at a premium to its peers. Click here to see values for some of the rating metrics that led to this rating.
The facts discussed here and plenty of other information on Zacks.com might help determine whether it’s worth paying attention to the market buzz surrounding Enphase Energy. However, its Zacks No. 2 ranking suggests it could outperform the broader market in the near term.
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Enphase Energy, Inc. (ENPH): Free Inventory Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.