The market is fragmented and ripe for consolidation. Most solar panel installers are small, independent operations, with more than 300 in California alone. Real Goods has bought 250 of them, including two of its biggest deals in the past seven months: Marin Solar and Carlson Solar, both acquired for $3.2 million apiece. Real Goods says it's evaluating another 15 takeover candidates with annual revenue between $3 million and $30 million. Once these companies are integrated, executives said in the company's roadshow, margins should fatten up a bit. Profit margins are one of the things that must be concerning investors in Real Goods Solar: They are razor thin, leaving the stock with a perilously high valuation. Real Goods Solar has posted a net loss in three of its last nine quarters (including the most recent one); and of the other six quarters, its net profit totaled between zero and three cents a share. As a result, the company posted a net profit of 3 cents a share in 2006 and one cent a share in 2007. Based on the initial offering price, the stock was valued at 333 times 2006 earnings and 1,000 times 2007 earnings. And that's counting the pre-IPO shares outstanding of 10 million. If you factor in the 15.5 million shares post offering, the valuation is even higher. One of the recent acquisitions, Carlson Solar, had a $1 million profit last year, so that could bump up Real Goods' earnings this year. Factoring in Carlson and Marin Solar, Real Goods had a pro-forma net profit of 5 cents a share last year. But that's still a PE ratio of 200 based on the offering price, and 159 based on the stock at Monday's close.