ENS

We rate EnerSys (ENS) as a Buy with a composite score of 65.8/100 at a current price of $174.00. The stock scores above average across the majority of our six quantitative factors and ranks #251 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in momentum (79th percentile) and value (76th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a Narrow Moat rating (45/100), High uncertainty, and Poor capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends; balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

EnerSys holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 65.8/100 places it at rank #251 in our full 7,333-stock universe. At $4.2B in market capitalization, EnerSys is a mid-cap player in the Manufacturing space, which limits certain scale advantages but may allow for more agile strategic execution.

The outlook is moderately positive, with revenue expanding at 1% and favorable momentum (79th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 29% (-13.5pp vs sector) narrow to operating margins of 11% (+9.3pp vs sector) and net margins of 7.5%, yielding a gross-to-net conversion rate of 26%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $174.00, EnerSys appears undervalued relative to its fundamentals. Our value factor score of 76/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 23.3x (roughly in line with the sector median of 22.3x), EV/EBITDA of 13.0x (near the sector median), P/B of 3.4x, P/S of 1.8x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a High uncertainty rating to EnerSys. Key risk factors include significant leverage (114% debt-to-equity). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: significant leverage (114% debt-to-equity). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 66th percentile and quality factor at the 61th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (66th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate EnerSys's capital allocation as Poor. Key concerns include suboptimal returns on capital. Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — EnerSys significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, EnerSys receives a Buy rating with a composite score of 65.8/100 (rank #251 of 7,333). Our quantitative framework assigns a Narrow Moat (45/100, trend: stable), High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 65/100.

Our analysis supports a constructive view on EnerSys. The combination of identifiable competitive advantages, high uncertainty, and poor capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.