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Trade-Ideas: Canadian Solar (CSIQ) Is Today's "Perilous Reversal" Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Canadian Solar ( CSIQ) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Canadian Solar as such a stock due to the following factors:

  • CSIQ has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $36.6 million.
  • CSIQ has traded 4.3 million shares today.
  • CSIQ is down 3.9% today.
  • CSIQ was up 9.5% yesterday.

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More details on CSIQ:

Canadian Solar Inc., together with its subsidiaries, engages in the design, development, manufacture, and sale of solar power products worldwide. The company offers solar wafers, cells, and solar module products that convert sunlight into electricity for various uses. Currently there is 1 analyst that rates Canadian Solar a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Canadian Solar has been 3.0 million shares per day over the past 30 days. Canadian Solar has a market cap of $671.2 million and is part of the technology sector and electronics industry. The stock has a beta of 2.75 and a short float of 11.6% with 1.53 days to cover. Shares are up 328.2% year to date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Canadian Solar as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:

  • The debt-to-equity ratio is very high at 3.44 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, CSIQ has a quick ratio of 0.55, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, CANADIAN SOLAR INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for CANADIAN SOLAR INC is currently extremely low, coming in at 12.80%. Regardless of CSIQ's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CSIQ's net profit margin of -3.31% significantly underperformed when compared to the industry average.
  • CANADIAN SOLAR INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CANADIAN SOLAR INC reported poor results of -$4.52 versus -$2.12 in the prior year. This year, the market expects an improvement in earnings ($0.21 versus -$4.52).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 50.5% when compared to the same quarter one year prior, rising from -$25.47 million to -$12.60 million.

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