Is Canadian Solar a Value Trap?

I have been bullish on Canadian Solar (CSIQ) recently and the stock has jumped over 20% in the last few weeks. However, concerns regarding the company’s debt are growing and many investors believe that the stock may be a value trap.

If you look at the fundamentals, Canadian Solar is probably one of the cheapest solar stocks on the market. The fundamentals combined with towering debt are the reason why many people think Canadian Solar is a value trap. However, I think Canadian Solar’s debt is manageable and the stock is not a value trap.

Canadian Solar accounts for one of the largest solar power firms available in the solar industry.
Throughout the past few years, the company has recorded considerable growth. The company’s yearly average sales growth during the past five years was very impressive at 18.5 percent, and the average earnings per share growth for the imminent five years is also high at 13 percent.

Recently, the company shared robust quarterly results, surpassing the earnings per share outlooks and escalating the top-line guidance for this year in the range of $3.0-$3.2 billion. This clearly indicates the anticipation to sell additional solar power plants in the other half of 2016. On the other hand, the company has a strong line-up of projects, and its escalating number of worldwide utility scale projects looks very auspicious.

As per Canadian Solar, the company’s project business endures to be sturdy with on time progress for construction in Japan, United States, and United Kingdom. The company’s financial power has permitted it to fund its projects at lesser than anticipated prices.

Apart from this, Canadian Solar has magnificently managed to ascent to the top of the module manufacturing industry throughout the last few years, which is an extremely challenging achievement, keeping in mind the level of struggle in the solar industry. In spite of financial concerns that carry on to disturb solar firms, the company is building out its manufacturing capacity at a quick rate.

As a matter of fact, Canadian Solar is preparing to escalate its wafer, cell and module size to 1 GW, 3.9 GW, and 6.4 GW by the end of this year. Furthermore, the company has achieved a CAGR of around 80 percent over a decade.

While many prominent solar firms are strategizing to execute conventional growth paths in the short term, Canadian Solar is noticeably implementing a more ambitious tactic. Keeping in mind the company’s prevailing rate of capacity growth, it is highly probable that it could turn into the biggest solar manufacturer in the coming years.
Published on May 26, 2016
By Prudent Investor

Copyrighted 2020. Content published with author's permission.

Posted in ...