ReneSola (SOL) went from a tremendous 2010 – gaining 84% and as much as 206% – to a complete collapse in 2011. On the heels of several disappointing earnings reports this year, SOL has dropped 66%, and is approaching all-time lows from 2008 and 2009.
*Chart created using TeleChart
A funny thing has happened to SOL throughout this period; its balance sheet has improved most of the way down. For at least four straight quarters, SOL has increased its cash and cash equivalents. Cash has gone from $171M at the end of June, 2010 to $438M at the end of June, 2011. Total liabilities have increased over this time about 25% to $1.24B with short-term borrowings remaining stable around $400M and long-term borrowings dropping from $189M to $133M. With a valuation that has sent shares well below book value (0.4), price-to-sales of 0.2, and a forward P/E of 5, it makes a lot of sense that SOL’s management has stepped up to repurchase shares. SOL has authorized up to $100M for these repurchases. From the CEO Xianshou Li:
…At present, we believe our shares are undervalued. Despite relatively weak capital markets and a challenging solar market, we are confident in the long-term prospects of our business and the industry as a whole. With a healthy cash position, we believe the share repurchase program will generate value for our shareholders…
At current prices, SOL is almost sure to make a greater profit on these purchases than by selling its polysilicon and wafers.
Given this vote of confidence in the company and fundamentals that suggest the company will survive a solar recession, I am adding ReneSola to the list of solar stocks to pick from the rubble.
Be careful out there!
Disclosure: I am long SOL.