Storm The Castle: Canadian Solar (CSIQ)

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.

Trade-Ideas LLC identified Canadian Solar ( CSIQ) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Canadian Solar as such a stock due to the following factors:

  • CSIQ has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $91.5 million.
  • CSIQ has traded 15.2 million shares today.
  • CSIQ is trading at 7.87 times the normal volume for the stock at this time of day.
  • CSIQ crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on CSIQ:

Canadian Solar Inc., together with its subsidiaries, designs, develops, manufactures, and sells solar wafers, cells, and solar module products worldwide. The company operates in two segments, Module and Project. CSIQ has a PE ratio of 32.7. Currently there are 5 analysts that rate Canadian Solar a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Canadian Solar has been 2.9 million shares per day over the past 30 days. Canadian Solar has a market cap of $1.4 billion and is part of the technology sector and electronics industry. The stock has a beta of 2.87 and a short float of 8.2% with 1.16 days to cover. Shares are down 16.3% year-to-date as of the close of trading on Tuesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more. Analysis:

TheStreet Quant Ratings rates Canadian Solar as a sell. 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 ratings report include:
  • 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 79.80% 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 ($3.25 versus $0.56).


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