As the world becomes greener, solar companies should grow. Sunedison Inc (NYSE:SUNE), ReneSola Ltd. (ADR) (NYSE:SOL), China Sunergy Co Ltd (NASDAQ:CSUN) and Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP) seem particularly well-positioned to benefit from the growing demand for solar technology. Let´s take a closer look at each company in order to understand why they would be good investment opportunities.
Sunedison Inc (NYSE:SUNE) (formerly known as MEMC Materials) is a semiconductor and solar technology provider for private companies and governmental agencies around the world; its market capitalization reaches $2 billion. Despite having recently reported a weak first quarter, guidance was still promising and analysts expect the firm to deliver low double digit EPS growth rates over the next five years. Trading at $8.50 per share, at 0.8 times its sales and a 70% discount to the industry average valuation, this stock looks like a buy and hold case to me; the company seems poised to capitalize on the reported $1 trillion to be invested on solar energy over the next 7 years.
Recently, management announced a major restructuring project that should reduce costs and ameliorate cash flows, mainly through workforce reductions. The plan also includes a shift in focus towards its solar energy segment, and away of its underperforming solar materials segment.
The solar installations segment is currently the biggest revenue contributor, although other product lines, like silicon wafers, continue to generate large amounts of cash. Going forward, its solar products are expected to drive growth, accompanying the transition towards green technologies.
A strong focus has been put on distributed generation (DG). “Unlike centralized power plants, the DG approach employs small-scale technologies to produce electricity at the close proximity of the end users. This makes DG a cheaper source of power generation as distribution costs get eliminated” (Zacks). This segment is expected to at least double its size by 2016, providing a stable source of income to the company as it further penetrates the market.
A Chinese market-leader
ReneSola Ltd. (ADR) (NYSE:SOL) is a Chinese solar wafer manufacturer with a market capitalization of $218 million. The company is expected to deliver EPS growth rates around 15% over the next five years while trading around $2.50 per share. This makes it quite undervalued in relation to its sales and book-values, which is why I’d recommend buying and holding on to this stock.