Solar Plays Starting to Shine, Part 1

In part 1 of Larsen Kusick's article, he takes a look at five of the biggest solar power names. Be sure to check back tomorrow for part 2.

Over the past two years, solar stocks have blossomed from idealistic but unprofitable speculative plays into revenue growth powerhouses. While we curse crude oil prices and their effect on the economy and gasoline prices, solar investors can only smile and thank these high prices for making solar power economically viable.

Years ago, when these solar names were just starting to gain traction, there wasn't much on the fundamental side for investors to compare. Most companies were focused on improving their efficiency profiles, trying to improve the percentage of solar energy that their panels could convert into electrical power. It made sense at the time, because investors were buying into compelling stories rather than companies with attractive fundamentals and useful valuation metrics.

With the exponential increase in demand for solar panels that has occurred alongside rising prices for traditional energy sources, we can now focus on recent quarterly revenue, earnings and margins. I have included a number of charts on five of the most interesting solar names.

First Solar(FSLR) is the 800-pound gorilla in the space, successfully scaling its thin-film technology and selling its modules to grid-connected power plants. Energy Conversion Devices(ENER) is another thin-film company whose profile has dramatically improved as management achieved profitability in its most recent quarter.

SunPower(SPWR) and SunTech Power(STP) are solar plays with products based on polysilicon-based technology that is more efficient than thin-film but dependent on the price of polysilicon, which has been in short supply in recent years.

Finally, Trina Solar(TSL) stands out because of its vertical integration strategy -- self-funding a large portion of its polysilicon demand by recycling silicon from the semiconductor industry. I included TSL after I noticed how cheap shares were relative to earnings expectations (which vary greatly among sell-side analysts).