We came across a bullish thesis on EnerSys (ENS) on Substack by Kristopher Rymer. In this article, we will summarize the bulls’ thesis on ENS. EnerSys (ENS)’s share was trading at $101.43 as of Feb 11th. ENS’s trailing and forward P/E were 12.58 and 10.48 respectively according to Yahoo Finance.
A technician connecting a lithium-ion cell to a battery charging system.
EnerSys is undergoing a significant transformation, shifting from its traditional lead-acid battery dominance to advanced lithium-ion and stored energy solutions, positioning itself for long-term success in energy storage, EVs, and commercial applications. This transition aligns with industry trends favoring maintenance-free, high-performance battery solutions, particularly in logistics, defense, and energy infrastructure. The company has strategically restructured its product offerings and acquisitions to expand into diverse end markets, capitalizing on the growing demand for innovative energy solutions.
EnerSys operates through four key business segments. The Energy Systems division, contributing 44% of revenue, serves data centers, telecommunications, and industrial power, with over one million installed systems worldwide. Motive Power, accounting for 42% of revenue, focuses on electric forklifts, mining vehicles, and automated warehouse logistics, holding a 22% global market share. The Specialty segment, generating 15% of revenue, caters to transportation, aerospace, and defense markets, with a dominant 30% market share in its serviceable addressable market (SAM). Notably, the recent acquisition of Bren-Tronics for $208 million strengthens its presence in defense applications, providing advanced portable power solutions. Additionally, the emerging New Ventures division is driving innovation in fast-charging technology, demand charge reduction, and utility backup power, with its first revenue recognition in early 2025.
EnerSys employs a modular platform strategy, integrating energy storage, power electronics, and software solutions. This approach enhances customer value by offering tailored solutions, ensuring strong market positioning. The energy storage component includes lithium-ion, Thin Plate Pure Lead (TPPL), and flooded batteries. Power electronics cover power transfer, fast EV charging, and wireless charging for automated warehouses. Meanwhile, software offerings provide asset management, cloud-based fleet tracking, and AI-driven predictive maintenance.
Regulatory policies play a crucial role in EnerSys’ future, with the Inflation Reduction Act (IRA) offering significant financial benefits. Section 45X tax credits boost annual earnings by approximately $155 million, translating to nearly $3.93 per share in EPS. These credits, recorded as a cost-of-goods-sold reduction, are expected to continue through 2032, providing a stable source of profitability. Despite political uncertainties surrounding the IRA, bipartisan support for domestic manufacturing jobs makes a repeal unlikely. This misunderstanding has led to an undervaluation of EnerSys’ stock, allowing the company to repurchase shares at attractive multiples, enhancing EPS growth.
Potential political shifts could introduce headwinds, particularly under a new administration. However, businesses and fleet operators are adopting lithium-ion solutions based on lower total cost of ownership and operational reliability rather than government incentives. Tesla and other private companies continue investing in EVs and charging networks, sustaining demand for advanced energy solutions. Importantly, EnerSys is not a retail EV battery supplier but rather an integrated energy systems provider, mitigating risks associated with changes in consumer EV incentives.
Looking ahead, EnerSys is expanding its market reach, supported by a recently awarded Department of Energy (DoE) grant to develop a lithium-ion gigafactory. Expected to be operational between 2027 and 2028, the 500,000-square-foot facility will supply all business segments, with 10% of capacity dedicated to a Department of Defense contract. This initiative strengthens its competitive advantage and ensures long-term growth in strategic industries.
The market’s current mispricing of EnerSys stock presents an opportunity for investors. The company’s transformation into a diversified energy solutions provider, bolstered by regulatory support and strong demand trends, is not fully reflected in its valuation. If EnerSys continues executing its strategy effectively, a rerating of the stock could occur as investors recognize the company’s long-term earnings power. Meanwhile, the combination of stable IRA tax credits, strategic acquisitions, and robust demand across key end markets provides a compelling risk-reward profile. Investors seeking exposure to the evolving energy storage landscape may find EnerSys an attractive opportunity with significant upside potential.
EnerSys (ENS) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held ENS at the end of the third quarter which was 30 in the previous quarter. While we acknowledge the risk and potential of ENS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ENS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article was originally published at Insider Monkey.