In part 1 of Larsen Kusick's article, he takes a look at five of the biggest solar power names. Be sure to check back tomorrow for part 2.

Over the past two years, solar stocks have blossomed from idealistic but unprofitable speculative plays into revenue growth powerhouses. While we curse crude oil prices and their effect on the economy and gasoline prices, solar investors can only smile and thank these high prices for making solar power economically viable.

Years ago, when these solar names were just starting to gain traction, there wasn't much on the fundamental side for investors to compare. Most companies were focused on improving their efficiency profiles, trying to improve the percentage of solar energy that their panels could convert into electrical power. It made sense at the time, because investors were buying into compelling stories rather than companies with attractive fundamentals and useful valuation metrics.

With the exponential increase in demand for solar panels that has occurred alongside rising prices for traditional energy sources, we can now focus on recent quarterly revenue, earnings and margins. I have included a number of charts on five of the most interesting solar names.

First Solar ( FSLR) is the 800-pound gorilla in the space, successfully scaling its thin-film technology and selling its modules to grid-connected power plants. Energy Conversion Devices ( ENER) is another thin-film company whose profile has dramatically improved as management achieved profitability in its most recent quarter.

SunPower ( SPWR) and SunTech Power ( STP) are solar plays with products based on polysilicon-based technology that is more efficient than thin-film but dependent on the price of polysilicon, which has been in short supply in recent years.

Finally, Trina Solar ( TSL) stands out because of its vertical integration strategy -- self-funding a large portion of its polysilicon demand by recycling silicon from the semiconductor industry. I included TSL after I noticed how cheap shares were relative to earnings expectations (which vary greatly among sell-side analysts).

Readers should keep in mind that these companies each have a number of other fundamentals that should be researched alongside the earnings and revenue that we're looking at in this piece. Production capacity and expansion plans, polysilicon supply contracts and debt levels (and the potential need for additional financing) are all part of the story for each name.

First, let's take a look at recent revenue growth, along with expectations for the next two quarters.

Solar Revenue Growth (Quarterly)
Click here for larger image.

A quick look at quarterly sales shows that all five of our names have made major strides over the past year. But adding two quarters of analyst estimates to the data shows us that there are high expectations on Trina Solar. Over the past four quarters, the company has tripled its revenue, going from $42.5 million in the first quarter of last year to $120.7 million in the first quarter of 2008. While these results are impressive, analysts are already expecting the company to maintain this growth, almost doubling sales to $225.4 million by the third quarter.

First Solar, meanwhile, is expected to reverse its recent pullback in sales, with third-quarter revenue expected to increase by 46% vs. the most recent first-quarter results. What surprises me is that the recent first-quarter sales of $196.9 million were a notable drop from the $200.8 million in the fourth quarter.

Energy Conversion Devices is a bit of a wild card in this group, because its recent quarter was so much better than analysts were expecting. As a result, the stock has continued a strong run over the past month, likely due to expectations that the current analyst estimates haven't caught up with how well the company is going to do in the near term. Looking at the chart here, the 26% increase in sales over the next two quarters is probably less than the market is actually expecting.

This leaves us with SunPower and Suntech Power, which both sport relatively modest revenue growth expectations around 25% over the next two quarters.

What do we make of all this data? Well, we can see one of the reasons for the outperformance of First Solar vs. the other solar names. No company benefited from the increase in demand for thin-film during 2007 as much as First Solar. There's no questioning the recent success, but I'm a bit taken aback by the high expectations on First Solar's next two quarters.

Annual Revenue Estimates
Ticker Recent Price Market Cap* 2008 2009 Price/Sales
2008
2009
SPWR 81.39 $6.36 $1,355.2 $1,934.8 4.7 3.3
STP 41.55 $6.89 $2,055.2 $3,049.6 3.4 2.3
ENER 79.19 $3.21 $250.7 $440.3 12.8 7.3
FSLR 288.22 $23.0 $1,035.1 $1,872.0 22.2 12.3
TSL 36.74 $0.92 $778.2 $1,232.8 1.2 0.7
Source: * in $billions

Larsen Kusick manages TheStreet.com Breakout Stocks service and regularly writes about equities that are poised for large growth, such as Akamai Technologies (AKAM), GameStop (GME) and Perfect World (PWRD), for TheStreet.com.

In keeping with TSC's editorial policy, Larsen Kusick doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Kusick is a research associate at TheStreet.com, where he works closely with Jim Cramer and works on TheStreet.com Stocks Under $10. Prior to joining TheStreet.com, he worked in options trading and management consulting. He appreciates your feedback; click here to send him an email.

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