Canadian Solar: Renewable Energy Growth Will Drive the Stock HigherCSIQ) offers a good investment opportunity for investors despite disappointing results in the second quarter.
This is because Canadian Solar is strategically growing its project pipelines and developing cost effective modules that should enable the company to deliver surprising profits in the future. Also the start of its new YieldCo will create an added value proposition for Canadian Solar.
These factors make the stock a buy at current levels.
Currently, its balance sheet carries total cash of $403 million and total debt of $1.44 billion.
End-market growth will drive results
The solar market has grown at a compounded average growth of 58% from 2010 to 2015. More impressively, the solar market is expected to grow 119% this year compared with 2015 in the United States. According to GTM Research, utility-scale installations will witness about 74% growth to 16 gigawatts of solar, while the residential and commercial markets will also grow significantly in 2016.
In connection with this robust growth, SEIA president and CEO Rhone Resch said, “This is a new energy paradigm, and the solar industry officially has a seat at the table with the largest energy producers.” He also commented that “because of the strong demand for solar energy nationwide, and smart public policies like the Investment Tax Credit and net energy metering, hundreds of thousands of well-paying solar jobs will be added in the next few years, benefiting both America’s economy and the environment.”
So, the solar market remains very attractive this year and in the years ahead.
However, the overall growth is expected to slow down in the next couple of years, but the residential and non-residential PV markets will continue to grow. This strong demand for PV modules is a welcome sign for Canadian Solar as Americas represents 43% of its revenue, mainly driven by module sales in the United States.
Also, the company is making significant progress concerning power project pipeline, market growth expectations and its technology, as well as its cost reduction roadmaps that should drive its growth ahead.
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Although shares of Canadian Solar has declined significantly this year, it has solid financial metrics, with a three-year average revenue growth of 16% and return on equity of 26.2% compared to an 8.8% industry average. Moreover, the solar demand across the world is growing: that should enable the company to expand its project pipeline and drive value for its shareholders.
At the same time, the company is expanding the capacity to meet this growing demand for solar and reducing its manufacturing costs. This will help the company to improve its earnings performance ahead.
Published on Oct 6, 2016By Yaggyaseni Mittra