This is a speculative stock, but a turnaround could be in the works. Demand from China is expected to double in 2012, and China is projected to overtake Germany and Italy to become the Top Solar market in 2013. Only investors willing to take a bit of risk should consider this play.
Some reasons to be bullish on First Solar Inc (FSLR)
It designs and manufactures solar Modules using a proprietary technology (thin film semiconductor technology). This technology gives it a distinctive advantage of its peers as its average solar module manufacturing cost is one of the lowest in the world. Management plans to ramp production capacity which will further lower its cost of production.
A massive short position, the percentage short of float stands at 43.2%. This makes it a great candidate for a short squeeze.
A free cash flow yield of 4.46%
Sales have improved from $2.0 billion in 2009 to $2.7 billion in 2011.
Annual EPS before NRI increased from $1.53 in 2007 to $6.01 in 2011.
A five-year sales growth rate of 62.9%
It even sports a decent cash ratio of 1.33.
A long-term debt to equity ratio of 0.25
A great current ratio of 2.5
A good quick ratio of 2.2
A 5 year historical EPS growth rate of 36%
A 3-5 year Estimated EPS growth rate of 15%
It has a strong balance sheet with great long-term debt-to-capitalization of 9.9% at the end of 2011. The industry average is roughly 32%. It finished 2011 with over $600 million in cash and cash equivalents and long-term debt of $619 million. This gives it a sharp advantage over many of its cash strapped peers.
Management recently stated that demand from Europe surged unexpectedly, and they have delayed the closing of their German plant to deal with this sudden surge in demand. The plant in Frankfurt is expected to operate close to full production capacity until October, and then management expects to wind production down and close the facility by the end of the year as part of their global restructuring plan.
Bloomberg reported that demand from China for solar panels was expected to double in 2012 and remain strong going forward. Bloomberg predicts that China will become the top solar market in 2013.
Suggested Strategy
It is attempting to put in a bottom so traders can deploy some money into this play on a test of the 12.50-13.00 ranges. A weekly close above 16 will turn the outlook to bullish. It would be a good idea to divide your money into three lots and deploy one lot in the above stated ranges, and one lot can be deployed on a weekly close above 16.00. The third lot can be deployed if one is presented with an extreme entry point such as a test of the 10.00 ranges. Another option would be to wait for a test of 13.00 and then sell puts at strikes you would not mind owning the stock at. The benefit of this strategy is that you get a chance to get into the stock at much lower price. Final price will be the strike price minus the premium you were paid. If the stock does not trade below the strike price, you at least get to walk away with the premium.
Company: First Solar Inc
Growth
- Net Income ($mil) 12/2011 = -39
- Net Income ($mil) 12/2010 = 664
- Net Income ($mil) 12/2009 = 640
- Net Income Reported Quarterly ($millions) = -449
- EBITDA ($mil) 12/2011 = 182
- EBITDA ($mil) 12/2010 = 918
- EBITDA ($mil) 12/2009 = 821
- Cash Flow ($/share) 12/2011 = 8.78
- Cash Flow ($/share) 12/2010 = 9.57
- Cash Flow ($/share) 12/2009 = 9.05
- Sales ($mil) 12/2011 = 2766
- Sales ($mil) 12/2010 = 2564
- Sales ($mil) 12/2009 = 2066
- Annual EPS before NRI 12/2007 = 1.53
- Annual EPS before NRI 12/2008 = 4.24
- Annual EPS before NRI 12/2009 = 7.53
- Annual EPS before NRI 12/2010 = 7.68
- Annual EPS before NRI 12/2011 = 6.01
Performance
- Next 3-5 Year Estimate EPS Growth rate = 15
- 5 Year History EPS Growth = 36.43
- ROE 5 Year Average = 21.08
- Return on Investment = 8.54
- Current Ratio = 2.5
- Current Ratio 5 Year Average = 3.72
- Quick Ratio = 2.2
- Cash Ratio = 1.33
- Interest Coverage Quarterly = N/A
Interesting companies
For investors looking for other ideas detailed data has been provided on one additional company. Our latest article could also prove to be a source of some new ideas Westport Innovations: Make It Pay You A 23% Dividend or get in at a lower price
Company: Boeing Co (BA)
Growth
- Net Income ($mil) 12/2011 = 4018
- Net Income ($mil) 12/2010 = 3307
- Net Income ($mil) 12/2009 = 1312
- EBITDA ($mil) 12/2011 = 7694
- EBITDA ($mil) 12/2010 = 6929
- EBITDA ($mil) 12/2009 = 3923
- Cash Flow ($/share) 12/2011 = 7.12
- Cash Flow ($/share) 12/2010 = 6.59
- Cash Flow ($/share) 12/2009 = 4.15
- Sales ($mil) 12/2011 = 68735
- Sales ($mil) 12/2010 = 64306
- Sales ($mil) 12/2009 = 68281
- Annual EPS before NRI 12/2007 = 5.26
- Annual EPS before NRI 12/2008 = 5.15
- Annual EPS before NRI 12/2009 = 1.87
- Annual EPS before NRI 12/2010 = 4.16
- Annual EPS before NRI 12/2011 = 4.8
Dividend history
- Dividend Yield = 2.40
- Dividend Yield 5 Year Average = 2.7
- Dividend 5 year Growth = 5.3
Dividend sustainability
- Payout Ratio = 0.29
- Payout Ratio 5 Year Average = 0.57
Performance
- Next 3-5 Year Estimate EPS Growth rate = 10.42
- 5 Year History EPS Growth = -4.82
- ROE 5 Year Average = 94.62
- Current Ratio = 1.20
- Current Ratio 5 Year Average = 1.02
- Quick Ratio = 0.43
- Cash Ratio = 0.27
- Interest Coverage Quarterly = 13.30
- Retention ratio = 71%
Conclusion
At the end of the day, this is a speculative stock and only individuals willing to take on some risk should consider this play. Given that demand in China is set to increase significantly and that the stock is attempting to put in a bottom, individuals who are willing to take this risk could be handsomely rewarded in the future. Investors looking for other ideas might find this article to be of interest Turbo-Charge Your Position In American Capital Agency.
Disclaimer
This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is imperative that you do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies-let the buyer beware
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: EPS and Price Vs industry charts obtained from zacks.com. A major portion of the historical data used in this article was obtained from zacks.com. Earnings estimates sourced from dailyfinance.com. Ycharts data sourced from Ycharts.com
