Why Shares of EnerNOC Tumbled Today

By Markets Fool.com

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

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What:
Shares of EnerNOC fell as much as 25% on Friday (they're down roughly 9% in recent trading) after the company issued guidance for the current quarter and the full year that fell well short of Wall Street's expectations.

So what:
EnerNOC provided guidance as part of its fourth quarter results. Although the energy management software provider managed to produce a fourth quarter loss that was substantially narrower than analysts had expected, it's little wonder the shares are being hammered -- the company's outlook was pretty horrific relative to consensus estimates:

Q4 2014-Achieved

Consensus estimate

Adjusted EPS*

($0.67)

($0.95)

Guidance

Q1 2015 Revenues

$48 million-$53 million

$52 million

Q1 2015 Adjusted EPS

($1.36) ($1.29)

($1.02)

2015 Revenues

$410 million-$430 million

$519 million

2015 Adjusted EPS

($1.77) ($1.66)

$0.66

Source: Thomson Financial Network, EnerNOC

The magnitude of these guidance misses is indicative of a company that in the middle of a significant transformation as it shifts focus from its grid operator activity in favor of its utility and enterprise business.

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Now what:
On paper, EnerNOC's business model looks pretty attractive more than a quarter of its forecast revenue for 2015 are recurring revenues, for example. Furthermore, despite accounting losses, the company has been free cashflow-positive for several years, while the stock appears to trade at a rather pedestrian valuation. Following today's rout, patient small-cap investors may wish to take a look at EnerNOC's business in order to determine whether they can become comfortable with the risks tied to its transformation.

The article Why Shares of EnerNOC Tumbled Today originally appeared on Fool.com.

Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool owns shares of EnerNOC. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.