Five Hot Solar Plays: The Fundamentals

SunPower and Suntech both look inexpensive relative to their thin-film counterparts. The reason: Profits at both companies are influenced so heavily by the supply of polysilicon. A case can be made that China-based Suntech looks like an interesting play on the basis of a more attractive multiple and better earnings growth outlook in 2009. However, in looking at quarterly numbers, I noticed that California-based SunPower has done the best job out of all these names in keeping operating expenses low while growing revenue, and even though sequential sales growth was flat-ish in the most recent quarter, I believe SunPower's expense control provides more confidence for investors in the event of a pullback in solar demand.

Trina stands out as a fundamentally cheap stock; this is particularly surprising when looking back at the revenue growth expectations for the coming two quarters. As I mentioned earlier, there is a surprisingly large variance in analysts' estimates for the company, leading me to believe that Wall Street as a whole is uncertain about Trina's prospects. The large discount in price/earnings valuation leads me to believe that Trina's story is highly contingent on the success of its vertically-integrated business model.

In April of this year, the company scrapped plans to build its own polysilicon plant -- which was cheered by the market, sending shares higher. However, the ongoing low valuation makes me think that TSL is simply bringing up the rear in what is a very crowded solar space.

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

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