Solar Plays Starting to Shine, Part 1

Readers should keep in mind that these companies each have a number of other fundamentals that should be researched alongside the earnings and revenue that we're looking at in this piece. Production capacity and expansion plans, polysilicon supply contracts and debt levels (and the potential need for additional financing) are all part of the story for each name.

First, let's take a look at recent revenue growth, along with expectations for the next two quarters.

Solar Revenue Growth (Quarterly)

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A quick look at quarterly sales shows that all five of our names have made major strides over the past year. But adding two quarters of analyst estimates to the data shows us that there are high expectations on Trina Solar. Over the past four quarters, the company has tripled its revenue, going from $42.5 million in the first quarter of last year to $120.7 million in the first quarter of 2008. While these results are impressive, analysts are already expecting the company to maintain this growth, almost doubling sales to $225.4 million by the third quarter.

First Solar, meanwhile, is expected to reverse its recent pullback in sales, with third-quarter revenue expected to increase by 46% vs. the most recent first-quarter results. What surprises me is that the recent first-quarter sales of $196.9 million were a notable drop from the $200.8 million in the fourth quarter.

Energy Conversion Devices is a bit of a wild card in this group, because its recent quarter was so much better than analysts were expecting. As a result, the stock has continued a strong run over the past month, likely due to expectations that the current analyst estimates haven't caught up with how well the company is going to do in the near term. Looking at the chart here, the 26% increase in sales over the next two quarters is probably less than the market is actually expecting.

This leaves us with SunPower and Suntech Power, which both sport relatively modest revenue growth expectations around 25% over the next two quarters.

What do we make of all this data? Well, we can see one of the reasons for the outperformance of First Solar vs. the other solar names. No company benefited from the increase in demand for thin-film during 2007 as much as First Solar. There's no questioning the recent success, but I'm a bit taken aback by the high expectations on First Solar's next two quarters.

Annual Revenue Estimates
Ticker	Recent Price	Market Cap*	2008	2009	Price/Sales 2008	2009
SPWR	81.39	$6.36	$1,355.2	$1,934.8	4.7	3.3
STP	41.55	$6.89	$2,055.2	$3,049.6	3.4	2.3
ENER	79.19	$3.21	$250.7	$440.3	12.8	7.3
FSLR	288.22	$23.0	$1,035.1	$1,872.0	22.2	12.3
TSL	36.74	$0.92	$778.2	$1,232.8	1.2	0.7
Source: * in $billions

Larsen Kusick manages TheStreet.com Breakout Stocks service and regularly writes about equities that are poised for large growth, such as Akamai Technologies(AKAM Quote), GameStop(GME Quote) and Perfect World(PWRD Quote), for TheStreet.com.