Is A Rebound In Sight For Enphase Energy Stock?

June 9th, 2025 by Trefis Team
ENPH: Enphase Energy logo
ENPH
Enphase Energy

Enphase Energy (NASDAQ: ENPH), a leading residential solar energy solutions provider, has seen its stock plummet by a staggering 70% over the past year, currently trading at $41. This significant drop takes the company’s valuation to the lowest levels seen in over five years. The primary driver behind this prolonged downturn is the softness in demand across the entire residential solar industry, as high interest rates have made customers hesitant to make large solar investments. See – What’s Behind Enphase Energy’s Stock Collapse? – for more details.

This raises a critical question for investors: Is ENPH stock a buy after such a substantial decline? This steep decline for Enphase Energy is particularly notable when compared to its peers in the challenging solar energy landscape. Over the last twelve months, Sunrun is down 40%, while SolarEdge Technologies has fallen by 60%. Even First Solar, which focuses on utility-scale power plants rather than residential solar, has seen its stock drop by 40% during the same period. It is exactly this downside risk, versus relative upside tradeoffs we made – at scale, in constructing the Trefis High Quality (HQ) strategy that has clocked >91% return since inception, and outperformed the S&P. Separately, see – 35% Downside For DocuSign Stock?

Image by Markus Winkler from Pixabay

Valuation Still Isn’t Cheap

Enphase Energy’s valuation presents a mixed picture relative to the S&P 500. Its Price-to-Sales (P/S) ratio of 3.8 is slightly higher than the S&P 500’s 3.0, suggesting it trades at a premium on sales. Similarly, its Price-to-Earnings (P/E) ratio of 36.7 is notably higher than the S&P 500’s 26.4. However, ENPH’s Price-to-Free Cash Flow (P/FCF) ratio stands at a favorable 10.6, significantly lower than the S&P 500’s 20.5, indicating strong cash generation relative to its market price. Check out our dashboard on Enphase Energy’s Valuation Ratios for more details.

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Revenue Growth Hasn’t Been Great

Enphase Energy’s revenue growth shows recent challenges despite a good long-term average. Over the last three years, its top line grew at an average rate of 6.5%, outpacing the S&P 500’s 5.5%. However, revenues have shrunk by 22.2% from $1.8 billion to $1.4 billion in the last 12 months, contrasting with the S&P 500’s growth. On the positive side, quarterly revenues recently surged by 35.2% to $356 million from $263 million a year ago, significantly outperforming the S&P 500’s 4.8% improvement.

Average Profitability

Enphase Energy’s profitability metrics are varied. Its Operating Income over the last four quarters was $153 million, resulting in a low Operating Margin of 10.7% compared to the S&P 500’s 13.2%. Net Income for the same period was $148 million, yielding a moderate Net Income Margin of 10.4%, slightly below the S&P 500’s 11.6%. In contrast, the company exhibits strong cash flow generation, with an Operating Cash Flow (OCF) of $513 million, leading to a high OCF Margin of 36.0%, significantly exceeding the S&P 500’s 14.9%.

Strong Financial Stability

Enphase Energy’s balance sheet appears strong. Its Debt-to-Equity Ratio is 22.1% (debt of $1.2 billion vs. market cap of $5.4 billion), which is comparable to the S&P 500’s 19.9%. Crucially, the company maintains a very robust financial position with a Cash-to-Assets Ratio of 47.2% ($1.5 billion in cash out of $3.1 billion in total assets), far surpassing the S&P 500’s 13.8%.

Poor Downturn Resilience

ENPH stock has demonstrated lower resilience during market downturns compared to the S&P 500.

  • Inflation Shock (2022): ENPH plummeted 77.5% from its peak, whereas the S&P 500 declined 25.4%. The stock has yet to recover to its pre-crisis high.
  • COVID-19 Pandemic (2020): ENPH fell 59.4% during the pandemic, significantly more than the S&P 500’s 33.9% drop. However, it recovered fully to its pre-crisis peak relatively quickly.

The Verdict

Enphase Energy exhibits strong cash flow generation and a robust financial position with ample cash. While its current valuation metrics are generally higher than the broader market on a sales and earnings basis, the stock appears appealing when compared to its own historical averages. At $41, ENPH trades at 3.8 times trailing revenues, significantly below its two-year average Price-to-Sales (P/S) ratio of 7.3 times. Investors have heavily penalized the stock due to a significant contraction in revenue last year, despite strong recent quarterly growth. A primary concern for investors remains the stock’s pronounced underperformance and slower recovery compared to the S&P 500 during recent market downturns.

Looking ahead, an expected decrease in interest rates should make residential solar financing more appealing. In the short term, the company’s move to shift its solar battery production from China to the U.S. to mitigate tariff impacts is likely to affect profitability. Ultimately, a recovery in residential solar demand and stabilization of the tariff situation are crucial for Enphase Energy’s performance to improve. The situation with Enphase Energy highlights the risks of investing heavily in a single stock. Building a diversified portfolio is crucial for balancing risk and reward. For example, the Trefis High Quality (HQ) strategy, which focuses on balancing risk and reward, has outperformed the S&P 500, Nasdaq, and Russell 2000 since its inception.

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