What happened
Shares of solar energy company Enphase Energy (ENPH -5.56%) jumped as much as 6.1% in trading on Monday as investors jumped back into renewable energy stocks. Shares of the stock held up well and are up 5.2% at 12:30 p.m. ET.
So what
Enphase has been on a growth tear, and that trend may not stop anytime soon. Electricity rates are high in Europe, and California's Net Energy Metering 3.0 (NEM 3.0) goes into effect next month. That will reduce the value utilities pay homeowners for solar, making it more cost-effective to install energy storage, which happens to be a product Enphase offers.
ENPH Revenue (TTM) data by YCharts
What's a little odd about the move today is that natural gas prices, which are the most directly competitive with solar energy, are down 14% today in the U.S. Today's price action was in part a reversal of last week's gains and partly a reaction to milder weather, which reduces demand for natural gas in winter months.
The market seems to think growing demand for rooftop solar because of NEM 3.0 and rising electricity prices will be a positive for Enphase Energy.
Now what
As much as I like the operating trends for Enphase Energy, the stock has gotten extremely expensive. You can see in the chart that shares trade for 14 times sales, an incredibly high price for any energy company.
ENPH PS Ratio data by YCharts
It's this price premium that will keep me out of the stock today. But this is a great company, so if the price comes down, it's worth considering if you're interested in solar energy.
