EnerSys (ENS)

Battery manufacturer EnerSys (NYSE:ENS) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 7.7% year on year to $951.3 million. Guidance for next quarter’s revenue was better than expected at $940 million at the midpoint, 1.4% above analysts’ estimates. Its non-GAAP profit of $2.56 per share was 8.8% above analysts’ consensus estimates.

Company Overview

Supplying batteries that power equipment as big as mining rigs, EnerSys (NYSE:ENS) manufactures various kinds of batteries for a range of industries.

Renewable energy companies are buoyed by the secular trend of green energy that is upending traditional power generation. Those who innovate and evolve with this dynamic market can win share while those who continue to rely on legacy technologies can see diminishing demand, which includes headwinds from increasing regulation against “dirty” energy. Additionally, these companies are at the whim of economic cycles, as interest rates can impact the willingness to invest in renewable energy projects.

Top competitors of EnerSys include Japanese company GS Yuasa (TSE:6674), and private companies East Penn Manufacturing and Exide Technologies.

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, EnerSys grew its sales at a tepid 4.7% compounded annual growth rate. This was below our standard for the industrials sector and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. EnerSys’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

EnerSys also reports its number of units sold. Over the last two years, EnerSys’s units sold averaged 1.5% year-on-year declines. Because this number is lower than its revenue growth, we can see the company benefited from price increases.

This quarter, EnerSys reported year-on-year revenue growth of 7.7%, and its $951.3 million of revenue exceeded Wall Street’s estimates by 6.9%. Company management is currently guiding for a 3.7% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to remain flat over the next 12 months. This projection doesn't excite us and suggests its newer products and services will not accelerate its top-line performance yet.

EnerSys has bad unit economics for an industrials company, giving it less room to reinvest and develop new offerings. As you can see below, it averaged a 26.1% gross margin over the last five years. Said differently, EnerSys had to pay a chunky $73.91 to its suppliers for every $100 in revenue.

This quarter, EnerSys’s gross profit margin was 29.1%, in line with the same quarter last year. On a wider time horizon, EnerSys’s full-year margin has been trending up over the past 12 months, increasing by 1.6 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

EnerSys has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 9%, higher than the broader industrials sector.

Analyzing the trend in its profitability, EnerSys’s operating margin rose by 5.3 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, EnerSys generated an operating margin profit margin of 9.7%, down 1.6 percentage points year on year. Since EnerSys’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

EnerSys’s EPS grew at an astounding 21.4% compounded annual growth rate over the last five years, higher than its 4.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into EnerSys’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, EnerSys’s operating margin declined this quarter but expanded by 5.3 percentage points over the last five years. Its share count also shrank by 11.9%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For EnerSys, its two-year annual EPS growth of 25.4% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, EnerSys reported adjusted EPS of $2.56, up from $2.12 in the same quarter last year. This print beat analysts’ estimates by 8.8%. Over the next 12 months, Wall Street expects EnerSys’s full-year EPS of $10.73 to shrink by 5%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

EnerSys has shown weak cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.5%, subpar for an industrials business.

Taking a step back, an encouraging sign is that EnerSys’s margin expanded by 2.6 percentage points during that time. We have no doubt shareholders would like to continue seeing its cash conversion rise as it gives the company more optionality.

EnerSys burned through $20.68 million of cash in Q3, equivalent to a negative 2.2% margin. The company’s cash burn increased meaningfully year on year and is a deviation from its longer-term margin, indicating it is a seasonal business that must build up inventory during certain quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

EnerSys’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 10.8%, slightly better than typical industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, EnerSys’s has increased over the last few years. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

EnerSys reported $388.6 million of cash and $1.21 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $591.1 million of EBITDA over the last 12 months, we view EnerSys’s 1.4× net-debt-to-EBITDA ratio as safe. We also see its $38.95 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly EnerSys blew past analysts’ sales volume expectations this quarter. We were also glad its EPS guidance for next quarter trumped Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 4.3% to $132.25 immediately after reporting.

Updated: December 4, 2025 at 9:05 PM EST

Before making an investment decision, investors should account for EnerSys’s business fundamentals and valuation in addition to what happened in the latest quarter.

EnerSys has some positive attributes, but it isn’t one of our picks. Although its revenue growth was uninspiring over the last five years and analysts expect growth to slow over the next 12 months, its rising cash profitability gives it more optionality. Tread carefully with this one, however, as its unit sales declined.

EnerSys’s P/E ratio based on the next 12 months is 13.3x. This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $144 on the company (compared to the current share price of $146.00).