ENERSYS (NYSE:ENS) – A GARP Candidate with Strong Fundamentals and Reasonable Valuation

ENERSYS (NYSE:ENS) emerged from our Peter Lynch-inspired screen as a potential candidate for long-term investors seeking growth at a reasonable price (GARP). The company, a provider of stored energy solutions for industrial applications, meets key criteria for sustainable growth, profitability, and financial health while trading at an attractive valuation.

Why ENERSYS Fits the GARP Approach

• Earnings Growth: ENS has delivered a solid 5-year average EPS growth of 16.8%, aligning with Lynch’s preference for sustainable but not excessive growth (15-30% range).
• Reasonable Valuation: With a PEG ratio of 0.51 (well below Lynch’s threshold of 1), the stock appears undervalued relative to its growth prospects. The P/E ratio of 8.6 is also significantly lower than both industry and S&P 500 averages.
• Strong Profitability: The company’s Return on Equity (ROE) of 19.0% and Return on Invested Capital (ROIC) of 13.7% indicate efficient capital allocation, outperforming most peers in the Electrical Equipment industry.
• Healthy Balance Sheet: ENS maintains a conservative Debt/Equity ratio of 0.57, below the screen’s 0.6 limit, and a robust Current Ratio of 2.7, reflecting ample liquidity to meet short-term obligations.

Fundamental Highlights

Our full fundamental analysis rates ENS a 7/10, noting strengths in profitability and valuation but flagging minor concerns in financial health. Key takeaways:

• Profitability: High margins (Operating Margin of 13.4%, Profit Margin of 10.1%) and industry-leading ROE/ROIC.
• Dividend: A modest but growing yield of 1.1%, with a 10-year track record of increases.
• Valuation: Cheap relative to peers, with a P/E below 96% of the industry.

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Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should always conduct your own analysis before making investment decisions.