Should you buy Enphase stock?

Enphase stock analysis. ENPH stock.

Enphase Energy produces batteries and microinverters for solar power and its been one of the strongest stocks of the last 10 years. Based on the recent share price, the company has a market cap of 21.3 billion.

With 1.8 billion of cash on the balance sheet and 1.2 billion of debt the enterprise value is 20.7 billion. Enphase revenue really started to take off in 2018. Sales have grown from $316m in 2018 to $2.6 billion over the last 12 months.

Over the same period, operating margin has improved from 0% to 21%, generating an operating profit of $554 million today. Meanwhile, net income was 492 million and free cash flow was 832 million.

That means the company is currently valued at 8 times revenue, 43 times earnings or 25 times free cash flow. The company also pays out a reasonable chunk of stock-based compensation, around 229 million.

But Enphase’s high valuation multiple is underpinned by strong growth. As you can see from the table, Enphase experienced barely any growth pre 2018 but since then we’ve seen annual growth in the region of 50% which is extremely impressive.

And based on analyst estimates that growth should continue. Analysis expect Enphase to grow 25% per year for the next few years and increase operating margin to 28%. This would lead to an operating profit of 1.3 billion and close to 1 billion in net income in less than 3 years.

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