Why Canadian Solar (CSIQ) Stock Is Up Today

NEW YORK (TheStreet) -- Canadian Solar (CSIQ) was gaining 5.1% to $25.43 Tuesday after announcing a joint venture with GCL-Poly Solar Systems Integration in China.

The new joint venture will build a manufacturing site in Funing, Jiangsu Province, China to produce crystalline silicon solar cells. Canadian Solar will own 80% of the new joint venture, which will have 300 MW annual production capacity in its initial phase.

The company hopes to reach 19% conversion efficiency in the plant by the end of 2014. If the facility is fully built it will have an annual production capacity of up to 1.2 GW is solar cells.

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TheStreet Ratings team rates CANADIAN SOLAR INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate CANADIAN SOLAR INC (CSIQ) 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 and poor profit margins."

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

  • The debt-to-equity ratio is very high at 2.25 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 0.62, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • The gross profit margin for CANADIAN SOLAR INC is currently extremely low, coming in at 14.71%. Regardless of CSIQ's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CSIQ's net profit margin of 0.81% is significantly lower than the industry average.
  • 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, CANADIAN SOLAR INC's return on equity is below that of both the industry average and the S&P 500.
  • This stock has increased by 225.93% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
  • CANADIAN SOLAR INC 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, CANADIAN SOLAR INC turned its bottom line around by earning $0.56 versus -$4.52 in the prior year. This year, the market expects an improvement in earnings ($3.31 versus $0.56).
  • You can view the full analysis from the report here: CSIQ 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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