Chicago, IL – November 18, 2024 – Zacks Equity Research shares Tactile Systems Technology TCMD as the Bull of the Day and Ares Management ARES as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Enphase Energy Inc. ENPH, Sunrun RUN and SolarEdge Technologies SEDG.
Tactile Systems Technology is a Zacks Rank #2 (Buy) that has an A for Value and a C for Growth. The company develops medical devices for the treatment of chronic diseases at home. Let’s explore more about this company in this Bull of The Day article.
Tactile Systems Technology, Inc. engages in developing and providing medical devices for the treatment of underserved chronic diseases. It provides lymphedema solutions and offers Flexitouch Plus and Entre Plus systems products. The company was founded on January 30, 1995 and is headquartered in Minneapolis, MN.
When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market’s expectations have been for the company and how management has communicated to the market. A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.
Tactile Systems Technology (TCMD) has a good earnings history with the company topping the Zacks Consensus in each of the last four quarters.
Over the course of the last four quarters the average positive earnings surprise works out to be 95%. This means the company is crushing the number nearly every quarter.
The company recently reported an earnings beat on November 4. EPS of $0.24 was $0.06 ahead of the estimate for a 33% surprise.
Earnings estimates revisions is what the Zacks Rank is all about.
Estimates are moving higher for TCMD.
This quarter has moved from $0.31 to $0.33 over the last 30 days.
Next quarter has slipped from a loss of $0.03 to a loss of $0.04.
The full year 2024 has increased from $0.59 to $0.66 over the last 60 days.
Next year 2025, has increased from $0.81 to $0.86 over the last 30 days.
For fiscal 2024 the company is expected to show 6.7% growth with $292.8M in sales. Next year analysts are calling for sales of $322M for growth of 10%. Investors love to see revenue acceleration like this.
The forward earnings multiple for this company comes in at 24.7x, which is a little high given the Zacks Style Score for Value is an A. The value comes in to play on the price to book multiple which stands at 1.8x. Price to sales is at 1.4 so there is plenty of room to grow.
Margins took a significant hit in the most recent quarter sliding from 11.6% to 6.5%. Gross margins for TCMD are at 72%, so with an increase in operating efficiency will result in higher operating margins down the road.
Ares Management is a Zacks Rank #5 (Strong Sell) after the company beat the Zacks Consensus Estimate when the last reported on November 1. The company is a global alternative asset manager that has four investment groups that invest in the tradable credit, direct lending, and private equity and real estate markets. This article will look at why this stock is a Zacks Rank #5 (Strong Sell) as it is the Bear of the Day.
Ares Management engages in the provision of investment and consultancy services. It operates through the following segments: Credit Group, Private Equity Group, Real Assets Group, Secondaries Group, and Other. The Credit Group segment includes the management of strategies across the liquid and illiquid spectrum, direct lending, and Asia-Pacific. The Private Equity Group segment involves the categorization of investment strategies as corporate, special opportunities, and Asia-Pacific. The Real Assets Group segment focuses on equity and debt strategies across infrastructure investments. The Secondaries Group segment consists of investment in secondary markets, alternative asset class strategies, private equity, real estate, infrastructure, and credit. The company was founded by Michael J. Arougheti, David B. Kaplan, John H. Kissick, Antony P. Ressler, and Bennett Rosenthal in 1997 and is headquartered in Los Angeles, CA.
When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market’s expectations have been for the company and how management has communicated to the market. A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.
In the case of Ares Management, I see three beats and one miss of the Zacks Consensus Estimate over the last year. The most recent quarter was a beat with the company posting $0.95 when the consensus was calling for $0.94. This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn’t make it a Zacks Rank #5 (Strong Sell) either.
The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.
The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower. For ARES I see annual estimates moving lower of late.
The current fiscal year consensus number moved lower from $4.15 to $4.07 over the last 60 days.
The next year has moved from $5.80 to $5.53 over the last 60 days.
Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).
It should be noted that a lot of stocks in the Zacks universe are seeing negative earnings estimate revisions. That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).
Enphase Energy Inc. recently revealed that its Solargraf software now comes with a new artificial intelligence (AI)-powered do-it-yourself (DIY) permitting feature for its customers in the United States. This DIY feature boasts the capability to automate the complex solar and battery permitting process and can thus help lower solar permit plan creation time by up to 95%.
The new DIY permit plan feature transforms the Solargraf platform into a complete end-to-end solution for solar and battery system design, proposal generation and permitting. This new feature not only optimizes installers’ productivity but also lowers costs by minimizing cycle times and operating expenses through an efficient, automated workflow.
The Solargraf platform, with its new DIY permitting feature, is expected to empower solar installers to operate more efficiently, which, in turn, might lure solar investors to add ENPH stock to their portfolio. However, to assert if it would be profitable to add this to your portfolio right now or wait a little longer, let’s delve deeper into the stock’s year-to-date performance, long-term prospects as well as risks (if any) to investing in the same. The idea is to help investors make a prudent decision.
Enphase Energy’s shares have lost 51.9% in the year-to-date period, underperforming the Zacks Solar industry’s decline of 41.3% as well as the broader Zacks Oil-Energy sector’s growth of 7.6%. The stock also lagged the S&P 500’s surge of 26% in the same period.
A similar dismal performance has been delivered by other industry players, such as Sunrun and SolarEdge Technologies, whose shares have lost 44.4% and 86.3%, respectively, year to date.
Enphase Energy has been persistently suffering in recent times due to the dismal demand environment in the United States and Europe. Such a sluggish demand trend has been adversely impacting the company’s product sales and, thereby, its operational results. This is further evident from ENPH’s poor third-quarter 2024 results despite it being a prominent U.S. solar microinverter manufacturer.
The company’s third-quarter revenues plunged 30.9% year over year, primarily due to a 56% decline in microinverter shipment. In fact, the company has been delivering such dismal operating performance for the past couple of quarters, which must have led to the notable year-to-date decline in its share price.
Although some improvements have been witnessed in the demand scenario in the United States and Europe lately, the overall impact is not going to disappear any time soon. However, with the U.S. Central Bank having lowered the interest rate for the nation after a long time, the downward pressure on ENPH’s bottom line might be relieved to some extent for the time being. So, the near-term expectations for Enphase’s operating results reflect mixed sentiments.
The Zacks Consensus Estimate for ENPHs’ fourth-quarter 2024 revenues and earnings indicates an improvement of 24.7% and 35.2%, respectively, from the prior-year quarter’s level.
However, the top and bottom-line estimates for 2024 mirror a disappointing picture. Moreover, the downward revision in its earnings estimate implies investors’ declining confidence in this stock. On a brighter note, the consensus estimate for ENPH’s long-term earnings growth rate is 9.7%. The consensus mark for 2025 earnings implies solid growth prospects. So, we may expect ENPH to recover from its current ordeal in the coming years.
In terms of valuation, ENPH’s forward 12-month price-to-earnings (P/E) is 17.77X, a premium to its peer group’s average of 15.57X. This suggests that investors will be paying a higher price than the company's expected earnings growth compared to that of its peer group.
The global supply market for semiconductors, integrated circuits and other electronic components used in some of Enphase’s products has recently experienced significant constraints and disruptions. This constrained supply environment has adversely impacted and could further affect component availability, lead times and costs. It might also increase the likelihood of unexpected cancellations or delays in the previously committed supply of key components for Enphase Energy.
In the United States, ENPH has been witnessing a demand slowdown due to higher interest rates, high channel inventory and the transition from Net Energy Metering 2.0 (“NEM 2.0”) to Net Energy Metering 3.0 (“NEM 3.0”) in California, which increased the payback period for Enphase Energy’s customers in the state. In Europe, the company faced a slowdown on account of softer customer demand as utility rates dropped and policy changes were implemented. The company expects some of these challenges to continue to affect its operational results in the near term, which, in turn, is likely to have an adverse impact on its fourth-quarter and full-year 2024 results.
Moreover, ENPH is highly debt-ridden, as evident from its long-term debt-to-capital ratio of 56.31X, much higher than its industry’s 48X.
To summarize, it is not advisable to add this stock to one’s portfolio right now, considering its premium valuation, dismal year-to-date performance and high leverage.
Nevertheless, those who already own this Zacks Rank #3 (Hold) company’s shares may continue to do so, considering its long-term growth prospects. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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