Companies in the solar industry have been causing a commotion over the past two weeks. Last Thursday, shares of SunEdison (SUNE - Analyst Report) dropped 12% in morning trading after banks that loaned the solar company nearly $2 billion for an acquisition of Vivint Solar (VSLR - Snapshot Report) had second thoughts on the loan.
(Also read, “Why Is SunEdison (SUNE - Analyst Report) Stock Crashing Today?”)
Then earlier this week, Vivint Solar announced that it has terminated the SunEdison acquisition agreement because SunEdison did not fulfill pre-specified requirements for the merger to take place. Vivint Solar also plans on taking legal action to address the alleged breach of contract.
Despite this report, shares of SUNE traded up 10% that day, while shares of VSLR were down 20%.
(Also read, “SunEdison (SUNE - Analyst Report) Stock is Soaring Today: Should You Buy It?”)
This current volatility with these two notable solar and electric companies makes a potential investment in them problematic. With this in mind, let’s examine three strong solar companies that may be a prospective investment.
1. ReneSola Ltd.
ReneSola Ltd. (SOL - Analyst Report) and its subsidiaries are engaged in manufacturing solar wafers in the People's Republic of China. The company's solar wafers are sold to both Chinese and international photovoltaic cell and module manufacturers.
The company currently has a Zacks Rank #1 (Strong Buy), as well as Style Scores of B, B, and A in value, growth, and momentum, respectively. ReneSola has had three positive earnings revisions for the earrings quarter ending in March 2016, and another three positive earnings revisions for the earnings quarter ending in June of 2016.
After missing our earnings estimate in the period ending in March 2015 by 40%, ReneSola outperformed our estimate the following three quarters. In chronological order form the period ending in June 2015 through the period ending in December 2015, the company’s surprise percentages were 88.24%, 260%, and 333.33%, respectively.
As the company reported growth with their EPS, ReneSola also increased its net margins over the last three quarters. From June 2015 through December 2015, the solar company had net margins of -2.91, -1.44, and -0.40 respectively.
In conjunction with these surprise percentages and positive earnings revisions, ReneSola’s market price is only about $1.40 per share! If the company outperforms the earnings estimates for a fourth quarter in a row and posts a positive EPS figure, there is a good chance to see ReneSola shares to rise.
2. SolarEdge Technologies, Inc.
SolarEdge Technologies (SEDG - Snapshot Report) is an Israeli-based company that provides power optimizers, power inverters, and a cloud-based monitoring platform. It serves residential solar installations to commercial and small utility-scale solar installations.
SolarEdge has a Zacks Rank #1 (Strong Buy). The company has had three positive earnings estimate revisions over the last 60 days for the earnings quarter ending in March 2016, and another two positive earnings estimate revisions over the last 60 days for the earnings quarter ending in June 2016.
From the earnings period ending in March 2015 through to the earnings period ending December 2015, SolarEdge outperformed our earnings estimate by 171.43%, 52.63%, 18.52%, and 32.26%, respectively.
Net margins for SolarEdge saw steady growth compared to their EPS figures fluctuating. From June 2015 through December 2015, the company had net margins of 6.50%, 8.85%, and 12.66% respectively.
Currently, the market price of SEDG stock is about $27.37 per share with a Forward PE figure of 18.52, indicating that the company’s stock has some quality value.
3. SunPower Corp.
SunPower Corp. (SPWR - Analyst Report) designs and manufactures high-efficiency silicon solar cells and solar panels based on an all-back contact cell design. SunPower's solar cells and panels generate electricity from sunlight for residential, commercial and remote power applications. Its proprietary all back contact silicon solar cell technology produces more power per square foot compared to conventional solar cells.
SunPower has a Zacks Rank #1 (Strong Buy). Unlike its fellow solar companies previously discussed, SunPower does not have any positive earnings revisions for the upcoming quarter or the quarter after. However, the company also does not have negative earnings revisions, which is more important. SunPower does have two positive earnings revisions for the year, one each over the past 30 and 60 days.
After missing our earnings estimate figure during the periods ending in March, June, and September 2015, posting negative surprise percentages of 44.44%, 35.71%, and 78.57%, respectively, SunPower responded significantly, outperforming our earnings estimate for the period ending in December 2015 by 20.14%. The quarter-over-quarter increase of the company’s reported EPS was a staggering 5666.67% -- $1.73 earnings per share from $0.03 earnings per share.
Unlike the previously mentioned companies, SunPower saw a decline in net margins, posting a 6.18% in June 2015, a 3.18% in September 2015, and a -11.86% in December 2015.
Currently, the market price of SPWR stock is about $23.35 per share with a Forward PE figure of 12.75, indicating that the company’s stock has more value than SolarEdge.
Final Thoughts
At this moment, it is difficult to go wrong with any of these three solar companies. Despite the volatility of some of the companies within and related to the sector, the solar industry is currently ranked in the top 7% in the Zacks Industry Rank.
There is some good value currently in the solar energy industry, and these three companies may require you to consider a new addition to your portfolio.
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