BOSTON (TheStreet) -- Solar stocks have heated up, driven by optimism about industry consolidation and an economic recovery. The Guggenheim Solar ETF (TAN) - Get Report has risen 5.9% in four weeks. The fund's top holdings, First Solar (FSLR) - Get Report, Trina Solar (TSL) , MEMC Electronic Materials (MEMC) , SolarWorld (SWV) and JA Solar (JASO) have gained as much as 12%. Still, there are preferred plays in the solar space.
The safest way to invest in green energy is through exchange traded funds, such as the Guggenheim Solar ETF. Other notable options are
PowerShares WilderHill Clean Energy Portfolio
Van Eck Global Alternative Energy ETF
, which emphasizes large-cap stocks.
Heading into earnings season, the following three stocks receive the highest reviews from analysts. In the following pages, they are ordered by aggregate rating from great to best.
is a Shanghai-based cell manufacturer with a record of outstanding growth. Since 2007, JA Solar has more than doubled its annual revenue, on average, and has amplified its net income by 81% a year, on average.
: JA Solar swung to a second-quarter profit of $29 million, or 18 cents a share, as revenue quadrupled to $353 million. The gross margin widened from 11% to 23% and the operating margin climbed from negative territory to 15%. At the end of the quarter, JA held $339 million of cash and $352 million of debt, equal to a quick ratio of 3.3 and a debt-to-equity ratio of 0.4. Return on equity improved to 13%. Return on assets climbed to 8.1%.
: Of analysts covering JA , 13, or 59%, rate its stock "buy," eight rate it "hold" and one ranks it "sell." A median target of $10.87 suggests a 12-month gain of 30%. The stock has risen 47% in 2010 and 5.3% in the past month. Yet, it has delivered an annualized three-year return of negative 16%.
predicts that the stock will more than double to $17.50.
forecasts a rise of 67% to $14. Bearish bank
rates JA Solar "sector perform" with a $7 target, implying 17% downside.
: JA is forecasted to post third-quarter sales of $435 million. The consensus estimate has risen $1.8 million in the past month. JA is projected to deliver adjusted earnings of 32 cents. The consensus has increased by 2 cents in four weeks. JA has an earnings-surprise average of negative 2.1%. It missed the second-quarter earnings consensus by 26%. Its stock fell 8% on the news. It beat the first-quarter consensus by 35% and its stock still dropped, by 7.5%. So, recently, JA is an earnings-season underperformer.
: JA's stock trades at a forward earnings multiple of 7.2, a book value multiple of 1.8 and a sales multiple of 1.3, 45%, 50% and 58% discounts to industry averages.
is an integrated Changzhou, China-based solar company. In the past three years, it has doubled sales annually, on average, and boosted EPS 85% a year.
: Net income more than doubled to $39 million. Earnings per share rose 49% to 52 cents. Revenue surged 147% to $371 million. The gross margin extended from 27% to 32% and the operating margin stretched from 12% to 22%. Trina had $686 million of cash and $627 million of debt, equal to a quick ratio of 2.3 and a debt-to-equity ratio of 0.7. Return on equity widened from 8.8% to 18%. Return on assets increased from 3.8% to 9.2%.
: Of researchers following Trina, 25, or 86%, advise purchasing its shares, three recommend holding and one suggests selling. The stock has risen 11% in three months. A median target of $35.24 implies a one-year return of 35%. Bullish forecaster
expects Trina's stock to advance 91% to $50.
predicts a rise of 63% to $42.50.
forecasts a gain of 61% to $42.
rates Trina "underweight" with a $25 price target, suggesting the stock will drop 4% to fair value.
: Trina is expected to deliver sales of $428 million. The consensus sales estimate has risen by $5.1 million in the past four weeks. Trina is projected to achieve adjusted earnings per share of 87 cents, which has jumped by 5 cents in the past month. The company has an historical earnings-surprise average of 5%. It beat the second-quarter earnings consensus by 2.6%, and its stock popped 5.8% on the news. But, Trina missed the first-quarter consensus by 13% and its stock dropped just 2.9%. So, recently, Trina has been an earnings season outperformer.
: Trina's stock currently sells for a trailing earnings multiple of 9.9 and a forward earnings multiple of 8.2, 50% and 38% discounts to industry averages.
is a vertically integrated solar company based in Jiashan, China. It engages in operations ranging from polysilicon production to module construction and sales.
: Rena swung to a second-quarter profit of $36 million, or 42 cents a share, from a loss of $3.6 million, or 6 cents, a year earlier. Revenue more than tripled to $254 million. The gross margin jumped from 5.1% to 30% and the operating margin climbed from negative territory to 21%. At the end of the quarter, Rena held $252 million of cash and $577 million of debt, translating to a quick ratio of 0.6 and a debt-to-equity ratio of 1.3. Return on equity rose to 2.1%.
: Of analysts covering RenaSola's stock, 10, or 91%, advise purchasing it and one recommends holding. None rate it "sell." The stock has surged 152% in 2010 and delivered annualized gains of 45% since 2007. A median target of $16.10 suggests a 12-month gain of 36%.
predicts Rena's stock will advance 86% to $22.
foresees a rise of 70% to $20.
Lazard Capital Markets
offers a target of $19.
expects a marginal rise to $12.
: Rena is projected to post quarterly sales of $313 million. The consensus sales estimate has fallen by $2.8 million in the past four weeks. Rena is expected to tally 53 cents of adjusted earnings. That figure has risen by less than one cent in the past month. The company has a historical earnings-surprise average of 22%. It beat the second-quarter earnings consensus by 8.3%, and its stock rallied 4% on the news. Rena exceeded the first-quarter consensus by 13%, and its stock jumped 10% on the beat. Rena is a recent earnings outperformer.
: ReneSola's stock currently trades at a forward earnings multiple of 7.8, a book value multiple of 2.3, a sales multiple of 1.3 and a cash flow multiple of 10, 41%, 35%, 58% and 33% discounts to industry averages. It ranks as analysts' favorite solar equity.
-- Written by Jake Lynch in Boston.
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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.