ENS Stock Can Provide Value to Investors
Technology and growth stocks continue to be in a bear market as investors shift their focus toward moneymaking companies. One tech stock that can add value to an investment portfolio and reduce risk is EnerSys (NYSE:ENS).
EnerSys is a mid-cap provider of stored energy solutions to the industrial sector. Its products include energy systems solutions, specialty batteries, battery chargers, and outdoor equipment enclosure solutions. (Source: “Company Info,” EnerSys, last accessed November 10, 2022.)
The company has some exposure to the electric vehicle (EV) sector via motive power batteries and chargers for electric forklifts and industrial EVs.
While EnerSys has delivered strong financial results, including profitability and positive free cash flow (FCF), EnerSys stock is down by 23% from its 52-week high of $86.82 and down by 37% from its record high of $104.47, which was set in April 2021.
Chart courtesy of StockCharts.com
EnerSys Generates Strong Financial Results
EnerSys’ revenues grew in four of the past five years to a record $3.4 billion in fiscal 2022 (ended March 30). That record high was well above the company’s pre-pandemic revenue levels.
The consensus estimate is that EnerSys will increase its revenues by 8.5% to $3.6 billion in fiscal 2023 and by 4.9% to $3.8 billion in fiscal 2024. That means the company’s forward multiple is an attractive 0.7 times its fiscal 2024 consensus revenue estimate. (Source: “EnerSys (ENS),” Yahoo! Finance, last accessed November 10, 2022.)
|Fiscal Year||Revenues (Billions)||Growth|
(Source: “EnerSys,” MarketWatch, last accessed November 10, 2022.)
EnerSys has consistently delivered earnings before interest, taxes, depreciation, and amortization (EBITDA) income in the past five fiscal years.
|Fiscal Year||EBITDA (Millions)||Growth|
EnerSys has also consistently delivered positive generally accepted accounting principles (GAAP) diluted earnings per share (EPS) in the past five fiscal years.
On an adjusted basis, the company’s EPS are expected to rise to $4.76 in fiscal 2023 and $6.03 in fiscal 2024. That means EnerSys trades at an attractive 10.9 times its fiscal 2024 consensus EPS estimate. (Source: Yahoo! Finance, op. cit.)
|Fiscal Year||GAAP Diluted EPS||Growth|
(Source: MarketWatch, op. cit.)
EnerSys has been an FCF machine, reporting $288.4 million for fiscal 2021 prior to reporting negative FCF for fiscal 2022. The drop in FCF was partly due to the company buying back $156.4 million worth of ENS stock in fiscal 2022, compared to buying none of its own shares in fiscal 2021.
|Fiscal Year||FCF (Millions)||Growth|
(Source: MarketWatch, op. cit.)
EnerSys’ balance sheet shows solid working capital, debt of $1.5 billion, and cash of $383.2 million.
I don’t see any immediate financial issues for the company. In fiscal 2022, its GAAP earnings easily covered its interest expenses.
EnerSys has attracted institutional investment, with 380 institutions holding the majority of EnerSys stock. Moreover, in the last six months, company insiders bought 110,118 shares of ENS stock. (Source: Yahoo! Finance, op. cit.)
Investors might want to consider adding some EnerSys stock to their portfolios following the recent sell-off. ENS stock also pays dividends, which would help cushion any further downside moves.