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Are Solar Stocks Cheap?
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I think everyone can agree that solar company stocks have been volatile. There seems to be lots of disagreement on their current valuation. Some people see the stocks as having run up too much, are over-bought, and expensive suggesting they should decline back to reasonable levels. Others see the stocks as cheap and are just getting started on major up moves.
All of these companies produce basically the same product. The product converts sunlight into electricity. Some of the companies use basic semi-conductor manufacturing processes to turn poly-silicon into photo-electric cells. Other companies use more exotic (different) processes to make cells out of thin films.
Solar Companies:
| Company Name | Symbol | Current Price | Revenue (million) | Qtrly Revenue Growth (yoy) | Earnings 2009 | Trailing P/E | Forward 2009 P/E | PEG 5 yr expected |
| Canadian Solar | CSIQ | $37.90 | $303 | 423% | $3.31 | N/A | 11 | 0.65 |
| | CSUN | $10.83 | $235 | N/A | $0.45 | N/A | 24 | n/a |
| Evergreen Solar | ESLR | $10.92 | $79 | 63% | $0.44 | N/A | 25 | n/a |
| First Solar | FSLR | $271.43 | $634 | 194% | $5.70 | 108 | 48 | 2.09 |
| JA Solar Holdings | JASO | $22.36 | $386 | 201% | $1.49 | 53 | 15 | 0.72 |
| Solarfun Power Holdings | SOLF | $20.65 | $343 | 304% | $8.16 | 47 | 3 | 0.34 |
| SunPower Corporation | SPWR | $82.64 | $906 | 92% | $3.42 | 328 | 24 | 1.03 |
| SunTech Power Holdings | STP | $44.95 | $1,350 | 83% | $2.58 | 44 | 17 | 0.87 |
| Trina Solar | TSL | $47.05 | $302 | 162% | $4.09 | 32 | 12 | 0.65 |
This chart shows us that all of the solar companies are growing rapidly. They are selling at high multiples of trailing earnings, but low multiples of future expected earnings. Many of the companies reported great growth in revenue and earnings in their last quarterly reports, beating analyst expectations. I like the trend.
On my web site I did a review of solar cell manufacturers comparing their 2007 production of 3.8 GW of power producing capacity with world energy consumption. This is a trivial amount of capacity. They could produce over 10 GW in 2008 and still be only a tiny fraction of world new installed capacity. As long a countries like
I like solar stocks as an investment in alternative energy and believe the future for these companies to be bright! I think the government incentive programs will continue and these stocks are cheap based on possible double or triple digit future growth. I especially like the stocks trading at low forward P/E ratios and low 5 year expected PEGs.
Full Disclosure: I have long positions in CSIQ and TSL.
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