Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What:
Shares of EnerNOC (ENOC) fell as much as 25% on Friday (they're down roughly 9% in recent trading) after the company issued guidance for the current quarter and the full year that fell well short of Wall Street's expectations.
So what:
EnerNOC provided guidance as part of its fourth quarter results. Although the energy management software provider managed to produce a fourth quarter loss that was substantially narrower than analysts had expected, it's little wonder the shares are being hammered -- the company's outlook was pretty horrific relative to consensus estimates:
|
|
Q4 2014-Achieved |
Consensus estimate |
|---|---|---|
|
Adjusted EPS* |
($0.67) |
($0.95) |
|
|
Guidance |
|
|
Q1 2015 Revenues |
$48 million-$53 million |
$52 million |
|
Q1 2015 Adjusted EPS |
($1.36) – ($1.29) |
($1.02) |
|
2015 Revenues |
$410 million-$430 million |
$519 million |
|
2015 Adjusted EPS |
($1.77) – ($1.66) |
$0.66 |
Source: Thomson Financial Network, EnerNOC
The magnitude of these guidance misses is indicative of a company that in the middle of a significant transformation as it shifts focus from its grid operator activity in favor of its utility and enterprise business.
Now what:
On paper, EnerNOC's business model looks pretty attractive – more than a quarter of its forecast revenue for 2015 are recurring revenues, for example. Furthermore, despite accounting losses, the company has been free cashflow-positive for several years, while the stock appears to trade at a rather pedestrian valuation. Following today's rout, patient small-cap investors may wish to take a look at EnerNOC's business in order to determine whether they can become comfortable with the risks tied to its transformation.