NEW YORK (TheStreet) -- Yingli Green Energy (YGE - Get Report) was gaining 7.1% to $3.68 on Thursday after the Chinese government announced new policies to encourage local governments to build solar project.
China's National Energy Administration called on local governments to identify projects in areas where electricity from solar projects can be distributed to nearby customers. The agency will encourage extra subsidies for projects in rural areas, and will promote new infrastructure installations, according to Bloomberg.
The new policy is part of China's efforts to build eight GW of solar projects by the end of 2014.
Shares of solar panel makers including Yingli, SolarCity (SCTY - Get Report) , Trina Solar (TSL - Get Report) , JinkoSolar (JKS - Get Report) , and Canadian Solar (CSIQ - Get Report) are gaining on the news.
TheStreet Ratings team rates YINGLI GREEN ENERGY HLDGS CO as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate YINGLI GREEN ENERGY HLDGS CO (YGE) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is very high at 38.10 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.49, which clearly demonstrates the inability to cover short-term cash 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, YINGLI GREEN ENERGY HLDGS CO's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for YINGLI GREEN ENERGY HLDGS CO is rather low; currently it is at 15.61%. Regardless of YGE's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, YGE's net profit margin of -8.36% significantly underperformed when compared to the industry average.
- YGE has underperformed the S&P 500 Index, declining 18.19% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- YGE, with its decline in revenue, underperformed when compared the industry average of 10.4%. Since the same quarter one year prior, revenues slightly dropped by 1.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: YGE Ratings Report
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