Enphase Valuation Ahead of Q2 Earnings

Posted on Jul 14, 2025

Using Fama and French’s 3-Factor model, I’ve been looking at valuation signals for Enphase going into its Q2 earnings call on July 22.

From the company’s most recent 10-Q (for the quarter ending March 31, 2025), here’s what the fundamentals say:

Book-to-Market Equity (B/M)

  • Book Value = 3,106,086,000
  • Total Liabilities = 2,295,388,000
  • Market Cap (March 31) = 5,508,000,000

Book-to-Market = (3,106,086,000 - 2,295,388,000) / 5,508,000,000
= 810,698,000 / 5,508,000,000
= 0.147

That’s a very low B/M ratio — firmly in growth stock territory. Investors are paying a lot more per dollar of book value, which tells me the stock is trading at a premium. That kind of premium only makes sense if the market sees strong upside potential in Enphase’s future — whether in innovation, expansion, or profitability down the line.

Earnings-to-Price (E/P)

  • EPS (TTM) = 1.09
  • Share Price (current) = 41.98

E/P = 1.09 / 41.98 = 0.026 or 2.6%

A low E/P ratio like this reinforces the growth narrative. The company isn’t generating much profit relative to its current share price, and the market seems okay with that — for now. It suggests that expectations are high, and investors are more focused on the long-term story than short-term earnings.

Cash Flow-to-Price (C/P)

  • Operating Cash Flow (TTM) = 415,090,000
  • Shares Outstanding = 131,207,018
  • Share Price (March 31) = 62.05

OCF per Share = 415,090,000 / 131,207,018 = 3.17
C/P = 3.17 / 62.05 ≈ 0.051 or 5.1%

This one’s a bit more reassuring. Operating cash flow per share comes in at about $3.17, which gives a 5.1% cash flow yield based on the March 31 stock price. While earnings are light, the business is still generating healthy cash — a good sign when navigating margin pressure or cyclical slowdowns.

So What?

Enphase is priced like a growth stock and needs to perform like one. The B/M ratio is low, the earnings yield is even lower, and the market is clearly expecting a rebound in demand or margins. The stronger C/P gives some breathing room — operationally, they’re still generating good cash even if accounting profits are thin.

Heading into the Q2 earnings call on July 22, I’ll be watching not just the top- and bottom-line numbers, but whether they signal strength going forward: unit volumes, pricing power, and whether cash flow keeps up even if earnings lag. If the story holds, the premium makes sense. If not, the market may reprice fast.

Big Beautiful Headwinds

There’s a lot of problems coming towards solar:

  • The BBB is phasing-out solar (and wind) tax credits. Unless someone’s project begins construction by mid-2026 or go live by end of 2027, they risk losing credits (and increasing costs/limiting growth).

Residential construction is particularly vulnerable (with projections suggesting a 50-60% decline in new clean power capacity through 2035).

Trump’s tariffs have also increased installation costs.

Going into Q2

  • Emphase’s growth outlook isn’t looking so great, they’ll need to compensate with more sell-through volume
  • On the other hand, they have strong cash flow and diverse product lines, so it may hold resilient