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.

Shares of EnerNOC (NASDAQ: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*






Q1 2015 Revenues

$48 million-$53 million

$52 million

Q1 2015 Adjusted EPS

($1.36) – ($1.29)


2015 Revenues

$410 million-$430 million

$519 million

2015 Adjusted EPS

($1.77) – ($1.66)


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.