Why Trina Solar (TSL) Stock Is Down Today

NEW YORK (TheStreet) -- Trina Solar (TSL) was falling 8.7% to $11.37 Monday on news that Credit Suisse lowered its 2014 demand forecast for solar installations in China.

The analyst firm lowered its forecast to 11.5 GW from 12 GW of solar installation, saying the government's goal of 14 GW for the year will be difficult to achieve.

"The rebound in demand is contingent on policy changes to address the quotas on utility scale development and FiT disbursement or reforming the incentives for distributed generation (companies agree the 8 GW target is not achievable under the current policy)," analysts Patrick Jobin, Brandon Heiken, and Maheep Mandloi wrote. "All companies agree that project returns are attractive in China at 8-12% unlevered and over 15% levered. The issue, we believe, is that the realization of these returns is contingent on getting the FiTs timely and with certainty and minimizing curtailment."

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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 3.4%. 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 199.77% 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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