Intrinsic value of Enphase Energy - ENPH

Previous Close

$0.99

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

  Value-price divergence*

-34%

Previous close

$0.99

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

 
Value-price divergence*

-34%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of ENPH stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -9.52
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  323
  329
  337
  346
  355
  366
  378
  391
  405
  420
  436
  453
  472
  491
  512
  534
  557
  582
  608
  636
  665
  696
  729
  763
  799
  837
  877
  919
  964
  1,010
  1,060
Variable operating expenses, $m
 
  348
  356
  365
  375
  387
  399
  413
  427
  443
  460
  478
  497
  518
  540
  563
  588
  614
  642
  671
  702
  734
  769
  805
  843
  883
  925
  970
  1,017
  1,066
  1,118
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  385
  348
  356
  365
  375
  387
  399
  413
  427
  443
  460
  478
  497
  518
  540
  563
  588
  614
  642
  671
  702
  734
  769
  805
  843
  883
  925
  970
  1,017
  1,066
  1,118
Operating income, $m
  -63
  -18
  -19
  -19
  -20
  -20
  -21
  -22
  -23
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -53
  -55
  -58
EBITDA, $m
  -52
  -15
  -15
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
Interest expense (income), $m
  3
  4
  3
  3
  3
  4
  5
  5
  6
  7
  7
  8
  9
  10
  11
  12
  14
  15
  16
  18
  19
  21
  22
  24
  26
  28
  30
  32
  34
  37
  39
Earnings before tax, $m
  -66
  -22
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -42
  -44
  -47
  -49
  -52
  -56
  -59
  -62
  -66
  -70
  -74
  -78
  -82
  -87
  -92
  -97
Tax expense, $m
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -67
  -22
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -42
  -44
  -47
  -49
  -52
  -56
  -59
  -62
  -66
  -70
  -74
  -78
  -82
  -87
  -92
  -97

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  18
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  164
  167
  171
  175
  180
  186
  192
  198
  205
  213
  221
  230
  239
  249
  260
  271
  283
  296
  309
  323
  338
  353
  370
  387
  406
  425
  445
  467
  489
  513
  538
Adjusted assets (=assets-cash), $m
  146
  167
  171
  175
  180
  186
  192
  198
  205
  213
  221
  230
  239
  249
  260
  271
  283
  296
  309
  323
  338
  353
  370
  387
  406
  425
  445
  467
  489
  513
  538
Revenue / Adjusted assets
  2.212
  1.970
  1.971
  1.977
  1.972
  1.968
  1.969
  1.975
  1.976
  1.972
  1.973
  1.970
  1.975
  1.972
  1.969
  1.970
  1.968
  1.966
  1.968
  1.969
  1.967
  1.972
  1.970
  1.972
  1.968
  1.969
  1.971
  1.968
  1.971
  1.969
  1.970
Average production assets, $m
  33
  34
  34
  35
  36
  37
  39
  40
  41
  43
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  78
  82
  85
  89
  94
  98
  103
  108
Working capital, $m
  35
  31
  31
  32
  33
  34
  35
  36
  38
  39
  41
  42
  44
  46
  48
  50
  52
  54
  57
  59
  62
  65
  68
  71
  74
  78
  82
  86
  90
  94
  99
Total debt, $m
  34
  22
  25
  29
  33
  38
  44
  50
  56
  63
  70
  78
  86
  95
  105
  115
  126
  137
  149
  162
  175
  189
  204
  220
  236
  253
  272
  291
  311
  333
  355
Total liabilities, $m
  162
  151
  154
  158
  162
  167
  173
  179
  185
  192
  199
  207
  215
  224
  234
  244
  255
  266
  278
  291
  304
  318
  333
  349
  365
  382
  401
  420
  440
  462
  484
Total equity, $m
  1
  17
  17
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  32
  34
  35
  37
  39
  41
  42
  45
  47
  49
  51
  54
Total liabilities and equity, $m
  163
  168
  171
  176
  180
  186
  192
  199
  206
  213
  221
  230
  239
  249
  260
  271
  283
  296
  309
  323
  338
  353
  370
  388
  406
  424
  446
  467
  489
  513
  538
Debt-to-equity ratio
  34.000
  1.290
  1.460
  1.650
  1.850
  2.060
  2.280
  2.500
  2.720
  2.950
  3.170
  3.390
  3.610
  3.830
  4.040
  4.240
  4.440
  4.640
  4.820
  5.010
  5.180
  5.350
  5.510
  5.670
  5.820
  5.960
  6.100
  6.240
  6.360
  6.480
  6.600
Adjusted equity ratio
  -0.048
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -67
  -22
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -32
  -33
  -35
  -37
  -39
  -42
  -44
  -47
  -49
  -52
  -56
  -59
  -62
  -66
  -70
  -74
  -78
  -82
  -87
  -92
  -97
Depreciation, amort., depletion, $m
  11
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  9
  10
  10
  11
Funds from operations, $m
  -26
  -19
  -18
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -41
  -43
  -46
  -49
  -52
  -55
  -58
  -62
  -65
  -69
  -73
  -77
  -82
  -86
Change in working capital, $m
  7
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
Cash from operations, $m
  -33
  -19
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -41
  -43
  -46
  -49
  -51
  -55
  -58
  -61
  -65
  -69
  -73
  -77
  -81
  -86
  -91
Maintenance CAPEX, $m
  0
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -10
New CAPEX, $m
  -12
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
Cash from investing activities, $m
  -12
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -7
  -9
  -9
  -9
  -9
  -10
  -10
  -10
  -12
  -12
  -13
  -13
  -14
  -15
  -15
Free cash flow, $m
  -45
  -23
  -22
  -23
  -25
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -41
  -43
  -46
  -48
  -51
  -54
  -58
  -61
  -64
  -68
  -72
  -76
  -81
  -85
  -90
  -95
  -101
  -106
Issuance/(repayment) of debt, $m
  17
  -12
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
Issuance/(repurchase) of shares, $m
  17
  38
  22
  23
  24
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  43
  45
  48
  51
  54
  57
  60
  64
  68
  72
  76
  80
  85
  89
  94
  100
Cash from financing (excl. dividends), $m  
  34
  26
  25
  27
  28
  30
  31
  34
  35
  38
  40
  42
  44
  47
  50
  53
  56
  59
  63
  67
  70
  74
  79
  84
  89
  93
  98
  104
  109
  115
  122
Total cash flow (excl. dividends), $m
  -11
  2
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
Retained Cash Flow (-), $m
  40
  -38
  -22
  -23
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -43
  -45
  -48
  -51
  -54
  -57
  -60
  -64
  -68
  -72
  -76
  -80
  -85
  -89
  -94
  -100
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -36
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -42
  -45
  -48
  -50
  -53
  -57
  -60
  -63
  -67
  -71
  -75
  -79
  -84
Discount rate, %
 
  9.40
  9.87
  10.36
  10.88
  11.43
  12.00
  12.60
  13.23
  13.89
  14.58
  15.31
  16.08
  16.88
  17.73
  18.61
  19.54
  20.52
  21.54
  22.62
  23.75
  24.94
  26.19
  27.50
  28.87
  30.32
  31.83
  33.42
  35.09
  36.85
  38.69
PV of cash for distribution, $m
 
  -33
  -16
  -15
  -13
  -12
  -11
  -10
  -9
  -8
  -7
  -6
  -5
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  20.8
  18.4
  16.2
  14.3
  12.5
  11.0
  9.6
  8.4
  7.3
  6.3
  5.5
  4.7
  4.1
  3.5
  3.0
  2.6
  2.2
  1.9
  1.6
  1.4
  1.2
  1.0
  0.8
  0.7
  0.6
  0.5
  0.4
  0.4
  0.3
  0.2

Enphase Energy, Inc., together with its subsidiaries, designs, develops, and sells microinverter systems for residential and commercial markets in the United States and internationally. The company’s semiconductor-based microinverter system converts direct current electricity to alternating current (AC) electricity at the individual solar module level. It also offers energy storage systems, including its AC battery; and system monitoring and control services. The company sells its microinverter systems primarily to distributors, as well as directly to large installers through original equipment manufacturers and strategic partners. Enphase Energy, Inc. was founded in 2006 and is headquartered in Petaluma, California.

FINANCIAL RATIOS  of  Enphase Energy (ENPH)

Valuation Ratios
P/E Ratio -0.9
Price to Sales 0.2
Price to Book 61.6
Price to Tangible Book
Price to Cash Flow -1.9
Price to Free Cash Flow -1.4
Growth Rates
Sales Growth Rate -9.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -7.7%
Cap. Spend. - 3 Yr. Gr. Rate 14.9%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 2100%
Total Debt to Equity 3400%
Interest Coverage -21
Management Effectiveness
Return On Assets -38.8%
Ret/ On Assets - 3 Yr. Avg. -19.2%
Return On Total Capital -144.1%
Ret/ On T. Cap. - 3 Yr. Avg. -67.6%
Return On Equity -319%
Return On Equity - 3 Yr. Avg. -129.1%
Asset Turnover 2
Profitability Ratios
Gross Margin 18%
Gross Margin - 3 Yr. Avg. 27%
EBITDA Margin -16.1%
EBITDA Margin - 3 Yr. Avg. -6.1%
Operating Margin -19.2%
Oper. Margin - 3 Yr. Avg. -8.7%
Pre-Tax Margin -20.4%
Pre-Tax Margin - 3 Yr. Avg. -9.5%
Net Profit Margin -20.7%
Net Profit Margin - 3 Yr. Avg. -9.7%
Effective Tax Rate -1.5%
Eff/ Tax Rate - 3 Yr. Avg. -6.9%
Payout Ratio 0%

ENPH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ENPH stock intrinsic value calculation we used $323 million for the last fiscal year's total revenue generated by Enphase Energy. The default revenue input number comes from 2016 income statement of Enphase Energy. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ENPH stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 9.4%, whose default value for ENPH is calculated based on our internal credit rating of Enphase Energy, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Enphase Energy.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ENPH stock the variable cost ratio is equal to 105.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ENPH stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 11.8% for Enphase Energy.

Corporate tax rate of 27% is the nominal tax rate for Enphase Energy. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ENPH stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ENPH are equal to 10.2%.

Life of production assets of 10 years is the average useful life of capital assets used in Enphase Energy operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ENPH is equal to 9.3%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1 million for Enphase Energy - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 58.323 million for Enphase Energy is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Enphase Energy at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

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▶ Top 10 Penny Stocks To Buy in 2017   [Jun-29-17 12:26PM  Insider Monkey]
▶ Enphase Energy to Host Analyst Day   [Jun-07-17 09:00AM  GlobeNewswire]
▶ ETFs with exposure to Enphase Energy, Inc. : June 1, 2017   [Jun-01-17 01:47PM  Capital Cube]
▶ ETFs with exposure to Enphase Energy, Inc. : May 22, 2017   [May-22-17 01:36PM  Capital Cube]
▶ Enphase Energy reports 1Q loss   [May-09-17 06:16PM  Associated Press]
▶ Enphase Energy Announces New Chief Operating Officer Role   [Apr-12-17 04:05PM  GlobeNewswire]
▶ Enphase Energy reports 4Q loss   [05:39PM  Associated Press]
▶ Enphase Energy Extends Term Loan Facility   [04:05PM  Marketwired]
▶ Here is What Hedge Funds Think About Enphase Energy Inc (ENPH)   [Dec-11-16 03:53AM  at Insider Monkey]
▶ Daniel Loeb Expands Position in Enphase Energy   [Oct-04-16 02:02PM  Gurufocus]
▶ A Terrible Way to Invest in Solar Energy   [09:04AM  at Motley Fool]
▶ 5 Companies That Destroyed Shareholders Last Week   [Sep-25-16 10:35AM  at 24/7 Wall St.]
▶ What is Going on With These Falling Stocks?   [Sep-23-16 11:18AM  at Insider Monkey]
Stock chart of ENPH Financial statements of ENPH Annual reports of ENPH
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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