Why Trina Solar (TSL) Stock Is Falling Today

NEW YORK (TheStreet) -- Trina Solar (TSL) was falling 1.4% to $11.40 in after-hours trading Friday after releasing an updated shipment forecast for the first quarter.

The company now expects to ship between 540MW and 570MW worth of solar modules in the first quarter, down from its previous guidance of between 670MW and 700MW. Trina Solar says the lower forecast is due to "a temporary decrease in shipments to the EU" following a deal for a new minimum price for the region's Chinese solar imports. The company expects shipments to increase when a deal is put in place.

Trina Solar also increased its Q1 gross margin forcast to between 18% and 20%, up from a mid-teens forecast. The increase is due to higher ASPs and a high-teens GM for a recent 50MW Chinese solar project.

Despite the lower forecast for the first quarter, Trina Solar still expects to ship between 3.6GW and 3.8GW worth of solar modules for the year.

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TheStreet Ratings team rates TRINA SOLAR LTD as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate TRINA SOLAR LTD (TSL) 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, solid stock price performance and impressive record of earnings per share growth. 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:

  • TSL's very impressive revenue growth greatly exceeded the industry average of 5.2%. Since the same quarter one year prior, revenues leaped by 73.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 117.07% and other important driving factors, this stock has surged by 292.73% 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.
  • The gross profit margin for TRINA SOLAR LTD is rather low; currently it is at 16.82%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, TSL's net profit margin of 2.94% is significantly lower than the industry average.
  • The debt-to-equity ratio of 1.26 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 0.65, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • You can view the full analysis from the report here: TSL Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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