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What Made Canadian Solar (CSIQ) Spike on Wednesday

NEW YORK (TheStreet) -- Canadian Solar (CSIQ) spiked on Wednesday on the announcement it had been approved for a loan from banking firm Natixis for up to C$52 million in non-recourse, construction financing.

By late afternoon, shares had added 5.9% to $42.45.

The loan facility, which has a maturity term of construction plus 10 years, will be used to finance solar plant 'Glenarm' in Ontario. The project is expected to be in operation by the fourth quarter of 2014 and has already received a 20-year power purchase contract by the Ontario Power Authority.

"Access to attractive financial backers gives us a distinct competitive advantage and has been essential to the successful rapid ramp of our project pipeline," said CEO Dr. Shawn Qu in a statement.

Since Monday, the stock has gained 12.4% after the company announced a partnership with Hitatchi to provide photovoltaic modules for a solar project in Japan.

Also See: Canadian Solar Scores Hitachi Win

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TheStreet Ratings team rates CANADIAN SOLAR INC as a Hold with a ratings score of C-. The team has this to say about their recommendation:

"We rate CANADIAN SOLAR INC (CSIQ) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CSIQ's very impressive revenue growth greatly exceeded the industry average of 5.9%. Since the same quarter one year prior, revenues leaped by 50.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 155.44% and other important driving factors, this stock has surged by 697.76% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • 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 ($0.87 versus -$4.52).
  • The gross profit margin for CANADIAN SOLAR INC is rather low; currently it is at 20.41%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, CSIQ's net profit margin of 5.64% is significantly lower than the industry average.
  • The debt-to-equity ratio is very high at 2.58 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 0.59, this demonstrates the lack of ability of the company to cover short-term liquidity needs.

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