The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Enphase Energy (NASDAQ:ENPH). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
How Fast Is Enphase Energy Growing Its Earnings Per Share?
Enphase Energy has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. Impressively, Enphase Energy's EPS catapulted from US$1.26 to US$2.18, over the last year. Year on year growth of 73% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Enphase Energy achieved similar EBIT margins to last year, revenue grew by a solid 64% to US$2.0b. That's encouraging news for the company!
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Enphase Energy's future EPS 100% free.
Are Enphase Energy Insiders Aligned With All Shareholders?
Owing to the size of Enphase Energy, we wouldn't expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. We note that their impressive stake in the company is worth US$1.1b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.
Is Enphase Energy Worth Keeping An Eye On?
Enphase Energy's earnings have taken off in quite an impressive fashion. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So based on this quick analysis, we do think it's worth considering Enphase Energy for a spot on your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Enphase Energy , and understanding it should be part of your investment process.
The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
What are the risks and opportunities for Enphase Energy?
Earnings are forecast to grow 28.08% per year
Earnings grew by 78.6% over the past year
Significant insider selling over the past 3 months
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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.
Exceptional growth potential with flawless balance sheet.