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First Solar, Inc. (FSLR) Pullback…Now An Opportunity?

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First Solar, Inc. (NASDAQ:FSLR)The post-earning reaction of a stock should not dictate your decision as to whether or not to invest in a company. Sometimes my greatest plays are those that trade lower after earnings, and then sometimes it is those that pop huge after earnings. When it’s all said and done, value is what drives long-term performance, and in this piece I am looking at two stocks that trended differently but present value.

Fair-Value Stock to Growth with Fundamentals

I’ll never forget May 2012 when Fossil Inc (NASDAQ:FOSL) fell from prices near all-time highs of $130 to near $70 for a loss of more than 40%. The large losses came following slowed growth and guidance that was virtually cut in half as the stock had grown too fast compared to fundamentals. However, since that drop, shares have rallied. And on Tuesday it ticked another 9% higher after reporting earnings. Now, after crossing over $100 I think the stock is here to stay and that future gains are to come.

In Q1 Fossil Inc (NASDAQ:FOSL) beat expectations with growth of 15% due to double digit wholesale sales gains in North America, Europe, and Asia. In the past, one or more of these regions were performing poorly, but it now appears as though all regions are clicking on all cylinders. This is evident by the company’s decision to raise guidance for this current year, which was enticed by strong growth of 22% in direct to consumer sales and the important jewelry brands.

In 2010 and 2011, Fossil Inc (NASDAQ:FOSL) saw its sales grow 30% and 25% respectively, although its stock grew more than 600%. Thus the stock traded at 35 times earnings with a price/sales of 3.50. Currently, growth has slowed to 15%, but the stock’s metrics at 19.50 times earnings and a price/sales of 2.20 are much more attractive. In many ways, the stock is now growing with fundamentals, rather than outperforming fundamentals. Hence I like the stock, especially with all three regions growing in double digits and the company’s high margin direct-to-sales segment outperforming overall growth.

A Pullback to Create Opportunity

While Fossil Inc (NASDAQ:FOSL) traded higher after earnings, shares of First Solar, Inc. (NASDAQ:FSLR) fell more than 8% as investors took profits in a stock that has tripled in the last year. Overall, the company’s quarter was very strong: It grew revenue by 52% to beat expectations and then slightly missed on the bottom line. However, the company met the high guidance that it set a couple months back during its analyst day, thus expectations were already priced into the stock.

After the company reported its quarter, many investors were negative of its large gross margin drop to 22.40%. However, I believe the company’s excuse of revenue recognition timing and construction delays, and a lower utilization rate, are all temporary problems. This is a company seeing great growth and has provided exceptional guidance to investors for the next two years.

As I said, First Solar, Inc. (NASDAQ:FSLR) has more than tripled from its yearly lows, and therefore a slight post-earnings pullback should’ve been expected. The company had just updated investors earlier this year and after such large gains the stock was overbought. However, First Solar, Inc. (NASDAQ:FSLR) has still lost 85% of its valuation during the last five years and is now trading at just 1.12 times sales with a forward P/E ratio of 13.90. Therefore, with capacity and module shipments on the rise and long-term guidance reflecting impressive growth, I say use this pullback as an opportunity to buy long-term.

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