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| Solar Stock |
Wait, solar energy equipment providers? Clothed in a quantity screen? Isn't with the aim of a growth industry?
It certainly looks like single to me. This is a marketplace with the aim of has increased another installed scope by a compound 51% twelve-monthly rate on the ancient decade, together with almost doubling another scope added in 2010 to on 10 gigawatts. Most analysts and participating firms are predicting 20% growth in total demand in place of solar in 2011. LDK Solar (LDK) earlier this week immediately upped fourth quarter revenue guidance by 22%, kicking up wafer and module load estimates in the process. Does this sound like an industry with the aim of ought to be harboring a quantity of quantity stocks?
What not far off from folks human being stocks? Perhaps near is selected snag with their send on demand trends, or maybe they maintain poor balance sheets, or the jiffy is breathing down their necks, appropriate? There ought to be selected snag in place of them to reveal up in a deep quantity screen.
MFI at present screens 2 stocks with the aim of are precisely leveraged to the solar industry - GT Solar (SOLR) [Premium Content] and Power-One (PWER) [Premium Content] . Another, Veeco Instruments (VECO) [Premium Content] , has a small thin-film equipment organization, but with the aim of routine is more strongly attached to the LED marketplace, so we'll ignore it in place of the resolution of this article.
What's abuse with GT Solar? The company makes early-stage solar cell production equipment, and is the #2 bringer behind equipment giant Applied Materials (AMAT) [Premium Content] .
Is it a poor balance sheet? Nope - the company has $260 million in cash and rebuff debt, as of the carry on 10-Q filing. A snag with the jiffy? No, nothing. Poor send on demand trends? Well, carry on quarter GT posted a 120% year-over-year increase in intensity in revenue, 345% in operating profits. For the fiscal time (ending March), revenue is slated to approach in 53% senior than 2010. For 2011, preliminary estimates are in place of not far off from 12% remuneration apiece share growth, although the company has a history of obliterating analyst targets.
And that's not even allowing for GT's another azure organization, which is leveraged to the similarly rapid growth of the LED lighting marketplace and is likely to ramp to virtually $200 million in revenue in place of fiscal 2012.
For all of this growth, the marketplace is solitary generous an adequate amount to stick a 12 P/E ratio (9.6 forward)? Does with the aim of kind perceive to everybody to boot? It doesn't to me.
What not far off from Power-One? This company makes the inverters with the aim of convert DC current from solar panels into the AC current used in place of everyday power. Reliability and modularity in artifact design has permitted the safe to extent #2 marketplace share in solar inverters, up from 9th in 2008.
There ought to be a poor balance sheet... Nope, $195 million in cash v. Immediately $40 million in debt. No jiffy inquiries with the aim of we know of. Demand trends look pretty comparable to GT Solar - fantastic. Clothed in the September quarter, Power-One posted 214% revenue growth and a nonsensical 4-figure percentage achieve in operating remuneration on 2009. Estimates in place of fiscal 2011 are comparable to GT - not far off from 12% growth on even 2010's binge levels.
Power-One is a crumb pricier than GT, by the side of a P/E ratio of 16 (about 11 contrary to full-year 2010 estimates). But that's like aphorism Walmart is a crumb pricier than Dollar General - they're both discounted. Investors attitude to earn returns on investment through both organic growth and valuation increases. That's how great big winners in routine portfolios are made.
I understand the bear legal action: Germany, the world's chief solar marketplace by far, is accelerating its reduction of feed-in tariffs, causing large demand pull-forward in 2010. This seems like more of a koala bear argument than a grizzly single. Both porcelain and Italy are likely to provide solar subsidies in 2011, and the U.S. Recently extended solar burden credits.
Clothed in some legal action, the daylight hours is fast approaching someplace the solar industry will rebuff longer maintain to rely on government largesse to grow. Clothed in the 1970's, a watt of solar power cost $50. This dropped to $10 in the 1990's, and stands by the side of not far off from $2/watt at the moment. The industry expects this progress to pick up again, with the cost dropping well underneath $2 in 2011. Manufacturers are rushing to contract solar overheads down under $1 apiece watt, by the side of which charge it becomes charge competitive with traditional power sources like coal. This cost parity will arise to drive demand in glut of government stimulus, and it is collection to go on very soon.
There are fewer things more smart in routine investing than the combination of quantity and growth would-be. Magic Formula stocks GT Solar and Power-One appear to maintain both in spades.