Canadian Solar (CSIQ) Showing Signs Of Perilous Reversal Today

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 "perilous reversal" (up big yesterday but down big today) 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 $129.8 million.
  • CSIQ has traded 1.7 million shares today.
  • CSIQ is down 3.1% today.
  • CSIQ was up 8.2% yesterday.

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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 17.1. 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 3.3 million shares per day over the past 30 days. Canadian Solar has a market cap of $1.9 billion and is part of the technology sector and electronics industry. The stock has a beta of 2.88 and a short float of 8.2% with 1.12 days to cover. Shares are up 28.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Canadian Solar as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins.

Highlights from the ratings report include:
  • CSIQ's very impressive revenue growth greatly exceeded the industry average of 10.4%. Since the same quarter one year prior, revenues leaped by 64.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 427.58% and other important driving factors, this stock has surged by 186.12% 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 CANADIAN SOLAR INC is rather low; currently it is at 18.95%. 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 8.94% is significantly lower than the industry average.
  • The debt-to-equity ratio is very high at 2.10 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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