Driven by the expansion of manufacturing activities in emerging economies and technological developments, the industrial equipment market is experiencing robust growth. Industry 4.0, also known as the fourth industrial revolution, has been a phenomenon that has taken the equipment sector by storm.
Integrating advanced technologies such as robotics, automation, machine learning, the Internet of Things, and AI into equipment and their working processes has created a more efficient space, reduced labor costs, and streamlined manufacturing processes. According to a study by market.us, the global Industry 4.0 market is forecasted to reach $482 billion by 2032, growing at an impressive CAGR of 20.7%.
Amid this backdrop, EnerSys (ENS) stands out as a key player in the aforementioned industry owing to its worldwide provision of stored energy solutions for industrial applications. ENS’ shares have surged 7.3% over the past nine months and 5% year-to-date to close the last trading session at $97.07.
Now, let us dive deeper into the factors that could shape ENS’ performance in the near future.
Stable Historical Growth
Over the past three years, ENS has demonstrated consistent growth across key financial metrics. Its revenue and EBITDA grew at a CAGR of 3.4% and 13.8%, respectively. Moreover, net income expanded at a CAGR of 23.9%, whereas its EPS grew at a CAGR of 26.3%.
Sound Financials
For the fiscal 2025 second quarter that ended September 29, 2024, ENS’ net sales amounted to $883.70 million. Its adjusted operating earnings increased 11.1% year-over-year to $114.60 million.
The company’s adjusted net earnings rose 13.1% and 15.2% from the year-ago values to $86.50 million and $2.12 per share, respectively. Also, its adjusted EBITDA came in at $129 million, up 12.6% year-over-year.
Optimistic Analyst Estimates
Analysts expect ENS’ revenue and EPS for the fiscal 2025 fourth quarter (ending in March) to increase 12% and 24.9% year-over-year to $1.02 billion and $2.60, respectively. In addition, the company exceeded the consensus EPS estimates in each of the four trailing quarters, which is impressive.
Looking at the full fiscal year ending March 2026, ENS’ revenue and EPS are expected to rise 4.1% and 4.3% from the prior year to $3.84 billion and $9.81, respectively.
High Profitability
ENS’ trailing-12-month EBITDA margin of 14.64% is 2.6% higher than the industry average of 14.26%. Its trailing-12-month EBIT margin stands at 11.91%, 14.4% higher than the industry average of 10.42%.
In addition, the company boasts a trailing-12-month net income margin of 8.25%, which is 27.4% higher than the sector average of 6.48%. Also, the stock’s trailing-12-month ROCE of 16.55% is 21.3% higher than the industry average of 13.64%.
Discounted Valuation
ENS is currently trading at a forward EV/Sales of 1.27x, which is 37.7% lower than the industry average of 2.04x. Moreover, the stock’s forward EV/EBIT multiple stands at 10.28, 39.4% lower than the industry average of 16.96x.
Additionally, it has a forward Price/Sales multiple of 1.05, which is 32.9% lower than the industry average of 1.56x. This indicates that ENS is undervalued compared to the broader market, offering potential upside for investors.
POWR Ratings Reflects Optimism
ENS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
ENS has a B grade for Quality, supported by profitability measures that exceeded industry benchmarks. It also earned a B grade for Value, driven by its discounted valuation metrics relative to the industry average. Moreover, the stock has a B for Sentiment, which is in line with the optimistic analyst estimates.
Within the Industrial - Equipment industry, ENS is ranked #6 out of 89 stocks. Beyond what is stated above, we have also given ENS grades for Growth, Momentum, and Stability. Get all ENS ratings here.
Bottom Line
ENS has established itself as a serious contender in the industrial equipment industry owing to its offerings regarding energy solutions. With advancements in the sector well on its way, the company’s prospects seem bright.
Given ENS’ impressive analyst estimates, high profitability, and attractive valuation, now could be the ideal time to consider adding the stock to one’s portfolio.
How Does EnerSys (ENS) Stack Up Against Its Peers?
Although ENS’ near-term outlook appears sound, it may be worthwhile to explore its industry peers, who also exhibit strong POWR Ratings. So, consider these A (Strong Buy) rated stocks from the Industrial - Equipment industry:
NL Industries, Inc. (NL)
Makita Corporation (MKTAY)
Espey Mfg. & Electronics Corp. (ESP)
To explore more A or B-rated Industrial - Equipment stocks, click here.
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ENS shares closed at $97.07 on Friday, down $-1.11 (-1.13%). Year-to-date, ENS has gained 5.02%, versus a 2.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Aritra_Gangopadhyay
Aritra is a financial journalist dedicated to breaking down complex financial topics into simple, actionable insights. Holding a Master’s degree in Economics, he uses his analytical expertise to help investors uncover unique opportunities for long-term success.
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