These Solar Stocks Suffered Burnout Tuesday

NEW YORK (TheStreet) -- Solid earnings for solar stocks weren't enough to keep the Wall Street bears at bay on Tuesday. By close, solar stocks Trina Solar (TSL), Yingli Green Energy (YGE), JinkoSolar (JKS), SunPower Corp (SPWR) and First Solar (FSLR) had been forced into retreat.

China-based, NYSE-listed stocks Trina, Yingli Green Energy and JinkoSolar plunged 5.7%, 10.1% and 6.6%, respectively. Solar companies Stateside weren't immune with SunPower Corp dropping 6.6% to $30.69 and First Solar shedding 3.9% to $60.42.

The industry sell-off came despite solid earnings for Trina Solar on Tuesday and JinkoSolar Monday. Reporting before the bell, Trina Solar posted its first profit in nine quarters. The company, located in Changzhou, northwest of Shanghai, recorded third-quarter net income of 14 cents a share, beating Yahoo! Finance estimates by 28 cents. Revenue of $548.4 million, 84% higher than a year earlier, was $75.5 million higher than consensus.

JinkoSolar, reporting before the bell Monday, also impressed with an earnings beat of 72 cents a share, 27 cents higher than expected. Revenue increased 45% year over year to $320.7 million, beating estimates of $302.22 million.

The strong earnings indicate Chinese solar companies are beginning to recover from a four-year downturn sparked by excessive production and strict anti-subsidy tariffs imposed on China-manufactured panels. Both Trina and JinkoSolar benefited from strong demand in Asian markets and less dependence on Europe.

TheStreet Ratings team rates Yingli Green Energy Holdings Co as a Sell with a ratings score of D. The team has this to say about their recommendation:

"We rate Yingli Green Energy Holdings Co (YGE) a SELL. This is driven by multiple weaknesses, 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 and poor profit margins."

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

  • The debt-to-equity ratio is very high at 12.34 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, YGE has a quick ratio of 0.54, this demonstrates the lack of ability of the company to cover short-term liquidity 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 Holdings 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 Holdings Co is currently extremely low, coming in at 13.64%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, YGE's net profit margin of -6.49% significantly underperformed when compared to the industry average.
  • This stock has increased by 317.76% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in YGE do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
  • Yingli Green Energy Holdings Co reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, Yingli Green Energy Holdings Co continued to lose money by earning -$3.13 a share vs. -$3.32 a share in the prior year. This year, the market expects an improvement in earnings (-$1.38 vs. -$3.13).

TheStreet Ratings team rates SunPower Corp as a Hold with a ratings score of C. The team has this to say about their recommendation:

"We rate SunPower Corp (SPWR) 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 impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

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

  • The revenue growth came in higher than the industry average of 9.4%. Since the same quarter one year prior, revenues slightly increased by 1.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 278.04% and other important driving factors, this stock has surged by 741.76% 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.
  • SPWR's debt-to-equity ratio of 0.89 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.98 is weak.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, SunPower Corp's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for SunPower Corp is currently lower than what is desirable, coming in at 25.26%. Regardless of SPWR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 16.49% trails the industry average.

TheStreet Ratings team rates First Solar Inc as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate First Solar Inc (FSLR) 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 robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

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

  • FSLR's very impressive revenue growth greatly exceeded the industry average of 9.4%. Since the same quarter one year prior, revenues leaped by 50.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • FSLR's debt-to-equity ratio is very low at 0.05 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.29, which illustrates the ability to avoid short-term cash problems.
  • First 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, First Solar Inc reported poor results of -$1.19 a share vs. -50 cents a share in the prior year. This year, the market expects an improvement in earnings ($4.39 vs. -$1.19).
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, First Solar Inc's return on equity is below that of both the industry average and the S&P 500.
  • The gross profit margin for First Solar Inc is currently lower than what is desirable, coming in at 33.26%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 15.41% trails that of the industry average.

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