Everpure

Where we land

Everpure sells data-storage hardware and the software and subscriptions that run it, and on most measures of a healthy business it looks strong. Sales are up 27% in a year, fast for a company of this kind. The gross margin, what is left of each sale after the direct cost of the product, has held near 70% for years, through good stretches and bad. We award it gold.

The difficulty is the price. At 173 times earnings, we think the shares already assume the best, and part of the profit behind that multiple comes from below the operating line rather than from selling storage. A strong business and a demanding price are both true at once.

What the business is

The company has two halves. Drives and peripherals, the physical storage systems, bring in 54% of revenue. Infrastructure software, including the subscriptions customers pay to run and upgrade that hardware, brings in the other 46%.

The balance has shifted markedly. In July 2023 hardware made up 65% of sales and software 35%. Since then software sales have risen 107%, more than doubling in about three years, while hardware has grown 29%.

The gross margin has not changed. Over five years it has sat at a middle value of 70%, typically within about a point either side, which says customers pay a consistent premium and the shift toward software has not cost pricing.

The weak spot is further down. After the cost of running the company, the operating margin is just 5%: the business keeps a large slice of every sale at the gross level, then spends almost all of it on running itself. That gap is the single most important fact about Everpure.

Why now

Three things have come together. The company is pitching its own flash modules and software to the largest cloud and internet operators as a replacement for the spinning hard disks that fill giant data centres, arguing on power, space and reliability; if they adopt it at scale, the market is far larger than the corporate customers Everpure has traditionally served. Everpure also joined the S&P 500 in September 2026. And on business quality it is among the strongest companies we rate.

The tension sits right alongside. Everpure's gross margin matches that of NetApp, a long-established rival, but its operating margin is a fraction of what its peers earn. The question is whether growth and attention can turn a high-margin product into a high-margin company.

The case for

The most visible event is the index inclusion, reported in early September alongside Illumina and Bloom Energy. Funds that track the index must hold the shares once Everpure joins, giving it a large, steady base of owners who do not trade on opinion.

The deeper case is the mix of sales. Software and subscription income tends to recur year after year rather than arriving in lumps when a customer buys equipment, and a company drawing nearly half its sales that way is sturdier than one selling boxes alone.

Growth is also speeding up. Total sales rose 27.2% this year against a three-year average of 15.5%.

Analysts expect that to show in profit. Consensus earnings per share is forecast to rise from 2.78 to 4.19, about 51% next year, and over 45 days 17 analysts revised their forecasts up against 3 who revised down. The durable version of that forecast is one in which operating profit, not income below the operating line, does the work.

Where the growth could come from

The shares are best explained by a business moving from steady to fast growth and being recognised for it. None of the possible engines below is separately visible in our revenue figures, so each is most likely what lies behind the numbers rather than something the company or the news has reported.

The lead storyline is flash replacing hard disks in giant data centres. It is early: such sales would sit inside the hardware line and in licensing, and our figures do not separate sales to the largest operators, so for now it is an option rather than the engine. Its importance is scale: a win at one or two of the biggest operators could add volumes far beyond the traditional corporate market and reset the long-run growth rate. A named customer moving from trial to full production, or a second disclosed win, would show it working.

Nearer to hand is the shift toward subscriptions. Storage sold as a service, with hardware upgrades built into the fee, moves revenue from one-off sales to recurring payments, and it is already visible in how fast the software line has grown. Recurring revenue is more predictable and usually earns higher margins, which helps explain why earnings are expected to grow faster than sales. The test is whether subscriptions keep outgrowing hardware and contracted future revenue keeps rising.

Artificial intelligence is a third possibility. Training and running AI models needs very fast storage to keep large numbers of specialist chips fed, and the company has built high-performance systems for these clusters and certified them with the chipmakers' platforms. Those sales are not separated in our figures, so this is a smaller option for now; large disclosed AI orders, or AI named as a leading reason for customer wins, would mark it becoming real.

The last is opportunistic. Broadcom's licensing changes at VMware, whose software many companies use to run their infrastructure, have pushed some customers to rethink their setups, the moment when customers switch storage suppliers. The company's software for newer, container-based systems offers a route across. Rising counts of new corporate customers and larger deals described as wins from rivals would show share being taken.

The case against

Start with the margins. Everpure's 70% gross margin has barely moved over 20 quarters and is level with NetApp and Sandisk, both at 71%. Lower down, Everpure's operating margin is 5%, against 26% at NetApp and 62% at Sandisk. The product earns the same premium as its rivals'; the company keeps far less of it.

Then the valuation. Everpure trades at 173 times earnings, where profitable peers sit between 14 and 34 times, and those earnings do not all come from operations. Twelve-month net income of 253m exceeds operating profit of 224m, so the multiple is paid on a profit figure the core business does not fully produce.

Nor has operating profit climbed steadily. It fell from 147m to 76m in the year to July 2025 before recovering, showing how quickly a 5% operating margin can halve when costs run ahead of sales.

Measured against assets, sales and earnings, the shares are among the dearest we rate, and they have grown dearer relative to the market over both six and twelve months. The recent strength needs care too: the shares are up 77% over six months, with the largest single move on 9 April 2026, and 29% over the year, yet their standing against the rest of the market over twelve months is almost unchanged. The surge has regained lost ground rather than broken new ground.

What the price assumes

If the share price stayed flat and in five years the shares were valued at 18.5 times earnings, the middle figure for every profitable listed company we cover, earnings would need to compound at about 57% a year, taking earnings per share to 6.88.

Over three years, earnings per share have risen about 56% a year, so on the rate alone the requirement looks almost met. Carry the recent trend forward, though, and earnings per share reach 6.39 in five years: 93% of what the price needs, implying about 54% a year.

The two tests disagree because the shape of earnings changed partway through: the fall and recovery in operating profit around July 2025 flatters the growth rate with a rebound from a depressed base. The analysts' 51% forecast for next year is close to the requirement but also below it. The price asks for growth near the best the company has recently managed, sustained for five years, with no slip.

The other side of the medal

The one risk to keep in view is a price that needs earnings to grow about 57% a year for five years while today's profit leans partly on income earned outside operations. Each half would be manageable alone; together they leave little margin for error.

At 173 times earnings against a peer median of 22, Everpure is the most expensive company in its peer group, a bet that profits will grow into the multiple quickly. If the support below the operating line fades before operating profit grows to replace it, reported earnings could stall even as sales keep rising, and a price built on rapid compounding would have little to stand on.

What to watch

The central question is whether operating profit, 224m in the latest year against 253m of net income, grows fast enough to carry the 51% earnings rise analysts forecast. The next results will only confirm a trend that should show up earlier elsewhere.

The clearest early sign would be a giant data-centre customer moving from trial to full deployment of the company's flash storage, a step usually announced before it reaches revenue. Growth in contracted future subscription revenue is another forward signal, since it records money customers have already committed.

The reading would be wrong if the operating margin stays near 5% as software grows, exactly when margins ought to be widening, or if the run of 17 upward revisions against 3 downward turns. Either would leave the valuation resting on income from below the operating line rather than on the business itself.

The numbers

Qualifications that apply to every figure above: net income exceeds operating income: earnings are supported by something below the operating line.

The same industry, for comparison

Research for information, not personal investment advice or a recommendation to buy, sell or hold any security: see Important information. Data as at 31 October 2026.