Earnings growth of 56% over 1 year hasn't been enough to translate into positive returns for EnerSys (NYSE:ENS) shareholders

By
Simply Wall St
Published
January 27, 2022
NYSE:ENS
Source: Shutterstock

The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in EnerSys (NYSE:ENS) have tasted that bitter downside in the last year, as the share price dropped 14%. That falls noticeably short of the market return of around 7.1%. Looking at the longer term, the stock is down 12% over three years.

Since EnerSys has shed US$178m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for EnerSys

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Even though the EnerSys share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped.

The divergence between the EPS and the share price is quite notable, during the year. So it's easy to justify a look at some other metrics.

Given the yield is quite low, at 1.0%, we doubt the dividend can shed much light on the share price. EnerSys managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
NYSE:ENS Earnings and Revenue Growth January 27th 2022

We know that EnerSys has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts

A Different Perspective

While the broader market gained around 7.1% in the last year, EnerSys shareholders lost 13% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.4% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand EnerSys better, we need to consider many other factors. For example, we've discovered 2 warning signs for EnerSys (1 doesn't sit too well with us!) that you should be aware of before investing here.

But note: EnerSys may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.