What happened

Shares of Enphase Energy (NASDAQ:ENPH) jumped nearly 19% last month, according to data from S&P Global Market Intelligence. The microinverter supplier announced solid third-quarter 2018 operating results that provided further evidence to investors the business is on solid footing. For instance, a shift to higher-margin products has led to an 8% increase in revenue and a 79% increase in gross profit in the first nine months of 2018, compared with the same period in 2017. 

That might only be the beginning, as the microinverter specialist will soon begin to reap the benefits from an important new supply deal with solar module leader SunPower. Throw in a promising new line of energy storage products that's expected to launch in 2019, and Enphase Energy may finally be hitting its stride.

A woman checking her phone and pumping her fist as cash money falls around her.

Image source: Getty Images.

So what

Enphase Energy delivered an impressive performance in the first nine months of 2018, highlighted by increasing revenue and falling cost of revenue -- not something investors see very often. While the business still delivered an operating loss of $3.4 million in that span, it marked a significant improvement from the operating loss of $37 million in the year-ago period. More impressive, that was accompanied by $14 million in operating cash flow, compared with a $26 million cash outflow from operations in the first nine months of last year. 

It should get better still. The company expects the SunPower contract to generate annualized revenue of $65 million at gross margin of 34%, which should be ramped up as the business exits 2019. If operations grow and maintain healthy margins, then that will create a solid financial footing for plowing money into the new Enchare AC battery lineup. The new energy storage portfolio makes it debut in 2019.

Now what

Enphase Energy has finally started to turn a corner in recent years, delivering two-year stock gains of over 320%. While there's still plenty of room for improvement, investors are encouraged by the recent signs of market traction and margin improvement the business is demonstrating. Considering the American solar market is growing hand over fist right now and delivering only 2.5% of total U.S. electricity production, the long-term growth potential for the business is tough to overlook.

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