Stored energy solutions provider EnerSys’ (ENS) website says: “The only constant in business is change”. True to its words, in the fiscal 2021 first quarter (ended July 5, 2020), the company changed its reportable segments to be based on lines of business—Energy Systems, Motive Power, and Specialty—from being based on geographic regions.
The change seems to be working well for ENS. Its stock delivered 84.5% returns over the past year and closed yesterday’s trading session at $94.24.
The company also paid a quarterly dividend of $0.18 on March 26, 2021. Furthermore, ENS entered several strategic alliances over the past few months and its ODYSSEY Performance batteries became available on February 1. As the electrical vehicle (EV) market is set to grow exponentially this year and beyond, we think it wise to bet on the stock now for solid upside.
Here are the factors that we think could influence ENS’ performance in the coming months:
Wide Portfolio of Products
According to Reportlinker, the global EV market is expected to grow at a CAGR of 29% over the next five years driven by the favorable measures taken by governments worldwide to achieve net-zero carbon emissions. Consequently, ENS is also expected to witness increasing demand for its products, such as battery chargers, battery accessories and related after-market and customer-support services.
The company is also expected to benefit from the gradual reopening of the global economy because its motive power products are used to power electric industrial forklifts used in manufacturing, warehousing and other material handling applications.
For its fiscal year 2021 third quarter, ended January 3, 2021, ENS’ net sales increased more than 6% sequentially to $751.10 million because of organic volume improvement. Its net sales from the motive power segment were $304.40 million for the quarter, up 15.4% sequentially, while net sales from the specialty segment came in at $109.50 million, up 6.6% year-over-year. The company’s net earnings also increased 41.4% year-over-year to $38.60 million, and its non-GAAP EPS increased 22.1% year-over-year to $1.27.
In February, ENS became the official battery partner of NASCAR Racing Experience (NRE), the leading experiential racing company in North America. In January, ENS expanded its manufacturer representative agreement with Industrial Battery & Charger, Inc. to grow its battery and charger product distribution.
Consensus Price Target Indicates Upside
Wall Street analysts expect ENS to hit $105.33 in the near term, which indicates a potential upside of 11.8%.
POWR Ratings Show Promise
ENS has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. ENS has an A grade for Momentum also. This is justified given its 33.6% gains over the past six months and 13.5% year-to-date.
It has a B grade for Value, which is in sync with its forward enterprise value/sales of 1.58x, which is 21% lower than the industry average 2.00x. The stock also has a B grade for Stability.
The stock has a B grade for Growth as well. This is consistent with analysts’ expectations that its revenue and EPS will increase 7.3% and 21.4%, respectively, in fiscal 2022.
Click here to see the additional POWR Ratings grades for ENS (Sentiment and Quality).
ENS is ranked #8 of 91 stocks in the B-rated Industrial – Equipment industry.
Click here to access several other top-rated stocks in the same industry.
ENS has come a long way from manufacturing batteries for industrial use to becoming a multibillion-dollar global industrial technology enterprise, delivering energy storage systems and solutions to customers across a wide range of industries and applications. It has immense growth potential and is also currently trading at a discount to its peers. So, we think this is an ideal time to scoop up its shares.
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ENS shares were trading at $92.20 per share on Wednesday afternoon, down $2.04 (-2.16%). Year-to-date, ENS has gained 11.21%, versus a 9.00% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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