EnerSys (ENS)

EnerSys is the world's largest manufacturer of industrial batteries, selling its products in over 100 countries. Over 60% of its business is done outside the United States. It counts many of the world's largest corporations among its customers.





The business is divided into three categories. Here they are in order from the largest segment to the smallest: reserve power, motive power, and aerospace/defense.





The reserve power segment sells batteries used in things like computers and telecommunications systems. The motive power segment sells batteries for things like forklifts and cars. The smaller aerospace/defense segment sells batteries for airplanes, submarines, and weapons systems.





At the relatively small market cap of 1.5 billion, ENS has a fairly dominant hold on the industrial battery industry. It has a wide moat, as Warren Buffett would say. Its biggest competitor is XIDE -- which is also a good pick, but a little riskier. ENS has by far the strongest fundamentals in the industry.





Consider the following:





Insider Ownership: 25%


Price/Sales: .76


Price/Book: 2.27


P/E: 27.92


F P/E: 17.78


Profit Margin: 2.73%


ROE: 8.9%


Quarterly Revenue Growth: 46.5%


Debt/Equity Ratio: .696





These metrics are better (in some cases dramatically so) than all its competitors. It is no wonder that ENS recently hit a new 52-week high. However, can we expect more growth out of this company? The answer is a resounding "YES," for three reasons:





1. ENS is a great green energy play


2. The growth of industry and technology in emerging markets


3. ENS completely dominates several important niche markets





GREEN ENERGY





ENS has taken a very forward-thinking approach to green energy. As the world moves away from combustion engines, they will look to ENS for battery-powered solutions. ENS sells batteries to big-time auto makers like Toyota and GM. Hybrid vehicles are a bull market. ENS is also making its batteries more clean and recyclable. If that weren't enough -- ENS also sells its batteries to the solar and wind industries, which will be MAJOR bull markets in years to come.





EMERGING MARKETS





Factories, electric grids, and telecommunications systems are growing all over the world. All those things need batteries, and ENS is in the best position to provide them to the world. Think of things like rural electrification, global infrastructure, the spread of the internet and cell phones to the rest of the world, etc. Of course, it doesn't hurt that every major telecom company from Verizon to China Mobile gets its batteries from ENS.





NICHE MARKETS





Aside from green energy, ENS dominates a few interesting niche markets that will help it grow. For example, the global infrastructure boom will also require lots of raw materials like copper, iron, aluminum, zinc, etc. These products will have to be mined -- and ENS holds a virtual monopoly on providing batteries for lighting to the mining industry. In warfare, the world's largest militaries are moving toward "smart" weapons that target more effectively and reduce civilian casualties. ENS provides batteries for these systems.





Add it all up, and ENS is a buy even at its latest highs.