Evergreen Solar (ESLR) announced it is filing for bankruptcy. This company once had a market capitalization in the billions, but over time it has been reduced to almost nothing. The company found it hard to compete with the China based solar companies since the manufacturing costs are so much lower in China. A new Wall Street Journal article states: "The market for solar panels is expanding world-wide. But the key thing driving demand is increasingly lower prices, which is forcing U.S. firms into a cutthroat cost-cutting war with rivals in China and elsewhere. "When margins are getting squeezed, pennies count," says Pavel Molchanov, a solar analyst with Raymond James Financial. "Quite frankly, as a solar manufacturer, it is a lot better to pay workers $1 an hour in China than workers $15 an hour in Massachusetts." Read more on that here. The article goes on to say: "Chinese solar manufacturers enjoy extensive support from government industrial policy. They benefit from inexpensive capital, low-cost electricity and real estate, as well as less-expensive labor, says Mr. Pichel. The global solar industry is growing quickly, in part because of government subsidies to promote clean-energy production and because of falling panel prices."
The dynamics cited in this article are not going to change anytime soon, so it makes sense to invest in China based solar stocks. The Chinese solar companies are best positioned to capitalize on the future growth of this industry due to their low cost manufacturing capabilities and their geographic proximity to key Asian countries that are expecting to rapidly expand their solar energy programs. Here are number of solar stock bargains that are based in China.
LDK Solar (NYSE:LDK) is trading at $6.80. The 50 day moving average is $6.70 and the 200 day moving average is $10.12. LDK has very strong earnings for a stock trading below $7, and based on guidance from the company, it appears they could earn over $3 per share in 2011. This puts the PE ratio at about 2.5. LDK is my favorite solar stock due to the low valuation, a possible Hong Kong IPO, significant financial backing by the China Development Bank, and their leading position in the industry.
Jinkosolar Holding Co., Ltd. (NYSE:JKS) is trading at $17.08. The 50 day moving average is $22.55 and the 200 day moving average is $25.14. JKS has earnings estimates of about $6.35 per share for 2011 and $5.52 for 2012. This puts the PE ratio at under 4. These shares have received multiple buy ratings with price targets of about $40.
JA Solar Company, Ltd. (NASDAQ:JASO) trades at $3.96. The 50 day moving average is $4.82 and the 200 day moving average is $6.46. JASO has earnings estimates of about $1 per share for 2011. This puts the PE ratio at about 5. According to Yahoo Finance, JASO has $2.61 per share in cash and has a book value of $6.76, so these shares are trading below book value.
Trina Solar, Ltd. (NYSE:TSL) has pulled back to about $14.61. These shares have a relative strength index of about 37 which indicates the shares are oversold. The 50 day moving average is $18.54 and the 200 day moving average is $24.13. TSL is estimated to earn $3.14 per share in 2011. According to Yahoo Finance, TSL has $6.98 per share in cash and has a book value of $17.41, so these shares are trading close to book value.
Yingli Green Energy Holding Co., Ltd. (NYSE:YGE) closed at $6.04 today. The 50 day moving average is $7.52 and the 200 day moving average is $10.24 so the shares are trading well below support levels. Estimates for YGE are about $1.19 per share in 2011. This puts the PE ratio at about 6 which is higher than the other names above, but it is still a huge discount to the stock market average.
Hanwha SolarOne Company (HSOL) shares are trading at $4.42. Hanwha SolarOne is a leading maker of wafers and solar modules and is based in China. The 50 day moving average is about $5.43 and the 200 day moving average is $7.30. Earnings estimates for HSOL are expected to be 82 cents for 2011 and 95 cents for 2012.
Daqo New Energy Corp. (NYSE:DQ) closed at $6.20 today. DQ is a leading polysilicon manufacturer, based in China. The 50 day moving average is $7.08 and the 200 day moving average is $10.87 so the shares are trading well below support levels. Estimates for DQ are about $2 per share in 2011. This puts the PE ratio at about 3 which is a huge discount to the stock market average. Book value is $8.56 per share.
The data is sourced from Yahoo Finance and Stockcharts.com. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes.
Disclosure: I am long LDK.