Here are my top three picks to join the bull run on solar stocks. Please bear in mind that these are US companies. You will need to complete a W-8BEN form with your broker to buy/sell American stocks.
First Solar (NASDAQ: FSLR), first founded in 1999, provides PV energy solutions for power plants worldwide and thin-film solar panels for all kinds of commercial application. First Solar believes that its thin-film technology differentiates it from its competitors as its panels are more cost-effective and more efficient.
Looking to First Solar’s balance sheet, the company has US$972.88 million in raw cash behind them with US$2.45 million currently as liabilities. It is safe to say that FSLR has a healthy balance sheet as debt has always been in decline. In terms of company valuation, First Solar’s earnings per share (EPS) is expected to be 3.46 in the next fiscal year.
What is exciting about First Solar is that the company shows so much promise with its encouraging financial indicators, but the price of this solar stock is undervalued when compared to their competitors. Although FSLR’s stock price crashed earlier this year, it seems that it is on the rise again with a 27% increase since March. I believe that First Solar will soon emerge from its lull in the stock market.
Solar Edge Technologies
Solar Edge Technologies (NASDAQ: SEDG) is a world leader in smart energy solutions for PV professionals, business owners and homeowners. Solar Edge has been a favourite solar stock among investors for quite some time and is seen as a reliable choice for return on interest.
This solar stock released its Q1 2021 report on the 31st of March. It reported revenues of US$405.5 million, which is a 13% increase from the prior quarter, and a Generally Accepted Accounting Principles (GAAP) gross margin of 34.5%, up from 30.8% in the last quarter. These figures are another demonstration of the consistent financial strength of Solar Edge.
There is some deliberation over whether Solar Edge’s share price will continue to rise or not in the next 10 years. This is due to the surge in competition from companies such as First Solar, Sunrun (NASDAQ: RUN) and Enphase Energy. However, with its reputation to innovate, I believe that Solar Edge will continue to be at the top of the pack.
Sunrun is one of the hottest solar stocks on the market today, with the price rising from last year by over 330%. It is a provider of residential solar panels and home batteries. Customers agree to pay for Sunrun’s solar instillations over a 20–25-year period.
When it comes to Sunrun’s financial performance, there are some risk indicators to consider from its balance sheet as we can see its debt-to-equity ratio is very high at 80% and it has negative net margins. This is not to say that the company is in danger of collapsing under debt but that I would need to proceed with some caution.
However, all indicators show Sunrun as a must buy to me. Its revenues are increasing, and Sunrun’s gross margin is positive at 19% for the last two years. So, what to do with Sunrun? I’m considering buying and holding for the next year, as analysts believe this stock has a 57.28% potential return, then reassess the situation after more light has been shed on this solar stock.
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John Town owns stocks in First Solar, Solar Edge and Sunrun. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.