A small position.
Through all this volatility, some premium (vs. the valuations I posted) continues to show itself.
Whether it's the promise of the segment (and faith in the Saas Model), the free cash flow, European, Japanese and other global upside, or potential for take-out -- the new range seems to be 21 - 22.50, where there is a boatload of March call options. Who knows.
shabdul---sorry to see you sell again. you're one of the people I follow on this board. am glad you didn't sell shares when that suspicious "phantom" pjm post hit the board. you're pretty well un-invested at this point and that takes almost all the emotion out of following the stock. you apparently sold half your shares on 12/9, then another third in early week two in january, and now another half which means you're at one sixth of the holdings you once established. i think you understand the company pretty well and i believe we'll see you back in at some point. please keep posting your thoughts as i will be reading them. don't overlook buying call options additionally if/when the share price drop occurs as you suspect it will. good luck to you!
well today after heavy pondering over couple of days I have decided to sell half of my position and see what happens from here on. I think we saw incredible run over a span of 2,5 years and its time to unload it and get "mentally free"/unattached from the stock. I agree with jpmarketer that from ST perspective there are no catalysts to propel the stock upward, maybe Im missing something but that's my impression so far. GL to all of you and I believe LT story is still bright, but I will gladly buy back the position at lower prices than let this psychological drag keep me focused on this stock more than needed.
Max Pain $20
50-say sma 19.60
25X Current year earnings $18.75
Earnings flat (possibly down) in 2014 (although EBITDA increases 18%). 15% revenue growth guidance 2 YEARS 2014/2015. No anticipated catalysts to impact earnings during this time (per management).
Currently re-defining the Company's core identity from a Demand Response Company to an Energy Intelligence Software Company with Demand Response as a "killer app." But Demand Response accounted for 89% of the Company's 2013 revenue, and PJM specifically was 40%.
European acquisitions are not accretive until 2016 and Japan has no projections for contribution to earnings, with end of March a decision point. Japan DR competition is intense
Demand Response is a hot segment, not only in terms of load curtailment, but load balancing and distributed energy management, which is where everything is heading. So the relevance of the technology is not disputed. It's the commercialization I wonder about -- the monetization, versus the infrastructure and cost structure needed - not so much to operate, but to market and sell, and for the R&D.
Also, there is the competition. In Japan, for instance, Enernoc is not exclusive with TEPCO. Schneider is big in Japan DR, and others. Also, on the DER front, I don't believe Enernoc is first in, or the leader in terms of product, technology and industry relationships. But I'm just learning about this piece and would welcome feedback.
So on whole, I agree with Motsam, Shabdul, Stacker and other posters who believe that the long-term opportunity is ripe. My challenge is, I think they got ahead of themselves pps-wise. Neither the fundamentals nor the technicals support the current share price, which, if bolstered by all the press and acquisition aniticipation, won't hold. The recent JPMorgan and STREET downgrades reflect this, whereas Cannacord and Baird seem to have vested interests. I challenge them reiterate the $30 price target today, given all the new info.
well here is my brief summary of earnings: numbers for the 1Q are ok. on FY14 numbers there seems less upside from current prices. what I think keeps the stock interesting are recent acquisitions in EU, Japan story, SaaS model. of course on the impact of these catalysts we will have to wait beyong probably this year. what i think is lost between the lines is that FCF growth should be around +18% y/y to ~50mil. USD, which seems really strong versus the revenue growth of 15%, and flat earnings growth. trying to find out where is this gonna come from. but that's definitely something not to be overlooked.
I came to conclusion that i will keep my current position (i think the long-term story is intact) and it will all depend on the execution. but before i add up to my position I would need to see some of recent updates to have material effect in the hard numbers.
I haven't read the 10K yet. I did listen to the call and review the income statement. Some observations:
Year on year 2013/2012 revenue growth was 38%. Revenue growth this year (2014) will slow to 15%.
DR accounted for 88% of the business in 2012, and 89% in 2013. This was a negative suprise. I would have thought the diversification efforts shifted the mix even somewhat in 2013 beyond primary reliance on DR, as had been envisioned by Management in previous quarters.
I can't find any breakout for software, which is lumped into "Everything other than Demand-Smart." Yet, the Company hs re-branded itself as an "Energy Intelligence Software Company," which is a disconnect that I increasingly suspect is aimed at valuaton goals - as much as business opportunity. I searched through the Organization to see at what level the Software Initiative (that now defines the whole Company) resides. Fielder Hiss oversees the initiative, a few layers lower than I would have thought.
Gross profit (2013/2012) was up about 55%. This was driven by the higher revenue and higher margins (very positive), from 44% to 50%. It was a GOOD year. My challenge is, with revenue growth slowing to 15% and earnings forecast to be flat, possibly down, what's going on with the forward look? Why isn't all the new stuff coming online?
I believe that the characterization of EBITDA growth as 271% is disingenuous. 2012 GAAP earnings were negative. With the addbacks to get to Adjusted EBITDA, the number became slightly positive ($18 million). Then, 2013 EBITDA increased roughly in line with gross profit, ending up at 71 million in 2013. That 271% is largely driven/inflated by the fact tht the 18 million in 2012 -- the based of the equation - is such a low number. That's arbitrary, because the 2012 GAAP earnings that were adjusted to get this number were negative in the first place. 71/18 doesn't tell the story. I tag the CFO w/this indiscretion.
Key questions - Whars the beef on software, where's the growth?
It's a long time between now and the end of the year, and all of that time is guided by Enoc at midpoint of .75 GAAP. Even with a 25X multiple, that's a price per share of $18.75. Best case FY 2014 earnings of .80, with a best case multiple of 25X, yields a price per share of $20.00.
Samgean hit it right on the head. if the valuation methodology changes to that for an SaaS company, then per his/her numbers, we could go higher (i've learned from his/her post). But I just didn't get any info, warm feeling from Healy, or anything on this. In fact, he got pretty nasty when pressed just on this topic, and that was not encouraging to me, given the lower than consensus guidance. For any of you who listened to the call, did you hear him on this topic? He bordered on rude, and clearly didn't want to quantify anything.
None of the new stuff is coming online in 2014 (incremental earnings-wise, at least) and PJM is still forecast to be 1/3 of Enernoc's business for the full year. It seems to me there is so much that can happen between now and next year -- technology, competitors, so much stuff, the segment is so dynamic. And they've pegged earnings at .70-.80, rght where we are now, virtually no earnings growth this year.
So I'm not buying at this point. Gonna wait to see where this settles out.
I wasnt able to listen to the call, will do that this weekend and see if I can discern anything new from it. One of the analyst orgs already submitted their updated report based on the earnings announcement & call and labeled it "Strong execution". (Then went on to set a $23 target price, which struck me as odd.) Anyhow, the breakout for the s/w revs for the year, purely based on the press release, looks to be $41M for the year. The 10-q will shed more light on exactly how much of that was actually SaaS revenue vs other stuff, but reasonable to suspect lion's share of the # in the press release was that. For rounding, lets say $40M. A 10x multiple on that gives a $400M valuation just for the s/w segment. ENOC as a whole has $615M market valuation right now. Minus $400M means that the rest of the biz + the excess of assets over liabilities is being valued at $215M, which seems rather cheap, given that the net current assets is +$150M. Will dive in deeper after I can look at the 10-q but the back-of-the-napkin math here would suggest that current share price is likely to have reasonably good support.
Good take, I think it's great long term news but how it's going to affect the price in the short term is beyond me. I'm really wondering if the guidance is genuine or just sandbagging considering the recent price movement (i.e. do you think management was trying to temper expectations or simply being realistic)?
My comments at this point based on results and the Conference Call:
Fantastic news on their penetration into the European market. They are executing as promised on their International strategy over the past few months.
The Japanese DR market is 170 GW, Germany 80 GW, and Ireland 5 GW. These are sizeable but are at least 2 years out before any meaningful impact to the bottom line. Nationally, Texas is also a ppotential catalyst but sounds to be a few years out as well.
The SaaS strategy is the real deal but is going to take time to develop. Their biggest problem is not market penetration as they are already in most of their potential customer’s locations with a DR offering but customer education. They are right on the mark with what is slowly happening out there – a need for an enterprise energy management system that all stakeholders can rely on and go to but internally to these customers it is a complicated sell. My feeling is this thing will take off but is at least 2 years out before it grows exponentially. For now I suspect a slow growth as early adopters proof out the concept.
Solid 4th Quarter with no big surprise. The guidance is disappointing as I feel it is scaled back from previous expectations.
What up with Healy and his attitude on the conference call? At times he seemed annoyed and others very indifferent. No idea what to make of that.
So overall – its hard to get the valuation right at this juncture. If you look short term, and slap a multiple on then you are where you guys say you are. If you go pie-in the-sky longterm on the potential market growth in DR and substantial traction in their SaaS offering then who knows?
Sentiment: Strong Buy
I think the fact that international is picking up is pretty huge especially w/ better DR prospects via new EU regs. PJM has long been the achille's heel of the stock and as their reliance on PJM wanes, I reckon the stock should have major upside. That being said, the numbers themselves were mixed (solid earnings, less than stellar guidance) and while I left halfway through the CC to make dinner, it sounded like they were vague regarding the technicals of the recent acquisitions.
As for AH movements, ENOC's never been much of a mover AH. Last earnings it popped like 11% after hours I think but when the market actually opened I think it went up marginally at best. The days after it moved up nicely I believe on analyst upgrades so I'm thinking in a complex industry like DR, it could take a few days to digest.
Not much happening in the afterhours. I have no idea what it will do tomorrow. If I had to guess, I would say it's all positive and will be up around $1 tomorrow. Anyone else?
Samangean, thank you. I just learned something from your post in terms of SaaS valuation. I do have some concerns, continuing to listen to the call as I am.
One of the analysts asked Healy to track against his commitments in the November conference - commitments for # of software customers end of 2013 and through 2014. Healy wouldn't, and even got a little edgy/sarcastic (I felt poorly handled).
I have felt all along that the re-positioning of the Company to Saas (which is carefully engineered by Marketing, down to every word used to paint the picture) -- was at least in part, valuation focused.
I've watched the continued, aggressive selling by Healy and Dixon - at these levels and below, and have not been enthused.
On the other hand, I look at all of the internationl expansion, which is nothing short of fantastic, the polar vortex, the continued acquisitions, decreasing reliance on PJM, the software business/positioning (for whatever its truly worth), and I really don't know where the offset falls, in terms of perception, real valuation.
That's how I would typically do valuation metrics for the stocks I own. But SaaS companies arent valued that way. It doesnt matter whether we understand or agree with the reasons that the market is giving 10-20x revenue valuations to them, but it is. And if ENOC doesnt plummet tomorrow (which it should, based on your valuation analysis, which I agree is reasonable) then it will be a clear sign that the market is giving credence to the idea that ENOC is becoming a true SaaS play. And to value that, the multiple on GAAP earnings is meaningless, you'd need to go to multiple of revenues. (This holds true to the extent that the market as a whole does not experience a correction to *all* SaaS companies.)
I dont have time to do it now, but hope to find time later to see if I cant look more closely at the numbers and carve out what revenues are expected to be from the s/w vs from the d/r.
Ya true. Stock's flat as can be AH and CC hasn't moved it so far. Stocks never much of an AH mover so perhaps we'll have to wait til tomorrow to see how the market views this.