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.
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.
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.
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.
At the current pps ($22.27 at 12:39 pm EST), a 25X multiple (current year) would require earnings of around $.89, versus the current consensus estimate of $.80 on sales of $447.53 million (when all settles out).
The .89 is about 11% higher than current estimate. So the offsetting developments of late -- unfavorable FERC order -- versus the positive -- Japan, Australia, Europe potential, world estimates for DR curtailment, Enernoc's movement to software, etc. would need to net out 11% ahead of today. Of course the valuation isn't that simple, but I guess it's a start.
One of the big unknowns to me is ENOC's sustainable competitive advantage. Do they have one, and also, infrastructure investments needed to continue expnding -- especially globally. This has always been their albatross in terms of earnings. But now, as they scale, the issue may be less relevant, paving the way for earnings to soar. I don't understand the dyamics of their P&L, if they're at the inflection point. But they could be, and that would be pretty amazing.
If they're not, and earnings and/or sales growth this year and next year are ho hum, then that 25X multiple will quickly seem unjustified, the bloom will be off the rose, and there could be a gap down.
Also, Motsam posted great stuff about DR global penetration through 2020. That's penetration, but the other factor in determining the size of Enernoc's business is its share. I don't understand the compettiive set - ENOC's ability to get and keep market share.
But then, also, there's potential to be acquired.
These are the offsetting things I can think of, what could make an impact, and how much.
I know for sure that when the earnings are announced, it will seem to clear - in hindsight, of course -- what should have been! Ain't that the way it always is --
Wondering if Shadbul or anyone in the know could take a look. I will later today but a probably won't undertand the implications either. I wonder if the pullback from 23.50 to sub-21 today is the PJM order, the market, just a healthy ENOC pullback from what was a parabolum, or some combo of the 3.
Around 21.10 is where I stopped trading. Two days ago, I would have been hard pressed to believe there would be a re-entry opportunity back down here. Now, skiddish to even begin accumulating here, given the market's volatility, the "correction-speak," today's ISM, ENOC's huge recent run, the PJM news, etc.
I'm sure if I don't, it will run, and if I do, it will slide. Death, taxes and this are certain.
I don't know the relationship in this case between a change in EBITDA vs. a change in EPS applicable to common shares. I assume for the moment that the Raymond James' call for 20% EBITDA growth in 2014 means 20% EPS growth from the 2013 level of .73 to .88 (versus current consensus of 10% earnings growth to .80).
With 2014 EPS at .88, the current pps of 23.36 would be a 26.5X multiple.
So if Raymond James is right about everything, it would seem that the "equilbrium" or sustainable price could be in this range - 22.50-23.50, versus the 17-18 range previously, with the multiple having risen from roughly 20 to roughly 25.
No acountant here, input welcome.
Silly, - Don't let the door hit you on the way out. Your behavior on this and other Yahoo Finance Boards is disgusting. You pick a male poster with a position contrary to yours and engage in name calling and anti-male rants (you seem to be a very angry, damaged person). We never had anything of the sort here. One only need look at your posts from this and all boards. What a disgusting, sexist troll. Get lost and don't come back. The only board clown here has been you. Not only here, but CREE, several other boards. Good riddance!
I've just read the "Street Authority" article in its entirety. The stellar growth quoted is all retro, there is absolutely nothing new, and the Canacord call is an extreme outlier. I truly don't understand the pps of 30 being 9X EBIDTA "in terms of enterprise value." If someone could explain that --
This is a pump article in a pump rag - 2 days before options expiration. In the years I've followed this company, I've never seen this. I'm in the Marketing Communications Biz. I know what this is.
EPS consensus earnings growth in 2014 is 10%, from .73 to .80. Period.Take a look on Yahoo under Analyst Estimates." Stocks don't grow 40% or 50% when earnings are growing 10%, unless further out opportunities are concrete. I love this company, it's one of the coolest companies around. But we're FAR from those numbers.
Not that guidance couldn't ramp up - of course it could, and we wouldn't know until it was already priced in. But I long for specfics, all I'm hearing is hype, and now I see that a penny stock rag is, in fact, pumping ENOC on Jan 15 before Fri Jan 17 expiration!
I will absolutely short again if I see a viable opportunity. We are all here to make money, after all.
This company has always had a dignified approach to things. I hope this isn't a sea change. It does look like a pump and dump to me. I continue to maintain no position, but I enjoy "stalking" and will wait to either make a trade or begin accumulating a longer term (long) position when I feel more confident about exactly what's happening. I do agree with the colorful poster that the long term opportunities of the Company - and the segment -- are great.
I captured most of the run-up. Sure I don't want to be left out of the next leg. But I need more than I have now to feel confident that it's imminent.
Mr. Healy has started to articulate the size of the respective markets, and the Company's ability to gain share.
I would like to see him make a more direct - versus conceptual link to earnings - some type of language about the magnitude of potential growth - responsibly, and within the constraints of being a publicly reporting company.
I think he can go further.