Solar Stocks Burn Out Even as Market Rallies

NEW YORK (TheStreet) -- As the rest of the market celebrated unemployment hitting a five-year low, solar stocks were left out in the cold after falling victim to an industry-wide sell-off.

ReneSola  (SOL) led the losses, falling 14% to $3.08 by early afternoon. A day earlier, the Chinese solar products manufacturer announced it would shutter a polysilicon factory plant in Sichuan and recorded an impairment charge of $202.8 million for its third quarter as a result. 

Credit Suisse remained bearish on ReneSola, reiterating an "underperform" rating and lowering its target price to $3 from $5.

"Bulls on SOL had argued that the company would benefit from rising prices of polysilicon in 2014-15, but the permanent retirement of 40% of polysilicon capacity now removes much of the potential upside," wrote analyst Brandon Heiken.

Following ReneSola's lead, Yingli Green Energy (YGE) plunged 9.7% to $4.58, Trina Solar (TSL) tumbled 5.6% to $12.61 and Canadian Solar (CSIQ) dumped 5.3% to $27.53.

TheStreet Ratings team rates ReneSola Ltd as a Sell with a ratings score of D. The team has this to say about their recommendation:

"We rate ReneSola Ltd (SOL) 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."

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

"We rate Yingli Green Energy (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 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'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 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 269.23% 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 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 continued to lose money by earning -$3.13 vs. -$3.32 in the prior year. This year, the market expects an improvement in earnings (-$1.39 vs. -$3.13).

TheStreet Ratings team rates Trina Solar Ltd as a Sell with a ratings score of D. The team has this to say about their recommendation:

"We rate Trina Solar Ltd (TSL) a SELL. This is driven by a few notable 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 of 1.49 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, TSL has a quick ratio of 0.66, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, Trina Solar Ltd's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for Trina Solar Ltd is currently extremely low, coming in at 11.62%. Regardless of TSL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, TSL's net profit margin of -7.63% significantly underperformed when compared to the industry average.
  • Trina Solar Ltd 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, Trina Solar Ltd reported poor results of -$3.76 vs. -58 cents a share in the prior year. This year, the market expects an improvement in earnings (-$1.20 vs. -$3.76).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 63.5% when compared to the same quarter one year prior, rising from -$92.1 million to -$33.65 million.

TheStreet Ratings team rates Canadian Solar Inc as a Hold with a ratings score of C-. The team has this to say about their recommendation:

"We rate Canadian Solar Inc (CSIQ) 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 compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins."

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

  • CSIQ's very impressive revenue growth greatly exceeded the industry average of 9.3%. Since the same quarter one year prior, revenues leaped by 50.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 155.44% and other important driving factors, this stock has surged by 1148.31% 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.
  • Canadian 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, Canadian Solar Inc reported poor results of -$4.52 a share vs. -$2.12 a share in the prior year. This year, the market expects an improvement in earnings (66 cents vs. -$4.52).
  • The gross profit margin for Canadian Solar Inc is rather low; currently it is at 20.41%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, CSIQ's net profit margin of 5.64% is significantly lower than the industry average.
  • The debt-to-equity ratio is very high at 2.58 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, CSIQ has a quick ratio of 0.59, this demonstrates the lack of ability of the company to cover short-term liquidity needs.

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