ABB Ltd (ADR) (ABB), Power One Inc (PWER) & More: Solar Stocks, Are They Winners?

Investors seem to be taking note of Enphase Energy Inc (NASDAQ:ENPH)’s micro-inverter technology and have sent the stock up 65% over the last six months. This is a remarkable turnaround for the stock after hitting a low in November. The company has a debt-to-equity ratio of 0.2 and its stock is currently priced 24 times next year’s expected earnings.

Surprises down the value chain

North Carolina-based Cree, Inc. (NASDAQ:CREE) is a surprise entry in this list as the company is better known as a LED player. However, Cree, Inc. (NASDAQ:CREE) manufacturers a wide range of silicon carbide (SiC) based MOSFET’s, which are used in solar inverters.

These products form the company’s power-products portfolio, which sold goods worth a total of $22.6 million in the three month ended December 2012. Although this contributed only 7% to total revenue during the period, higher margins in these niche products effectively resulted in a contribution of 9.2% in gross profits.

The company states its MOSFET’s offer faster switching speeds than comparable silicon-based power devices for a given power level. This also means its products are priced higher and have limited market penetration, but the business is nevertheless growing at a healthy rate (59% for the latest quarter and 23% for the past six months).

The downside with Cree, Inc. (NASDAQ:CREE) is that its stock price may be a bit overvalued, even at a forward price-to-earnings multiple of 31, and it cannot be considered a solar play.

Foolish bottom line

All in all, the transaction is a resounding reminder that all is not lost on the renewable front. However, the gains are evidently limited and a broad-brush approach of buying solar panel manufacturers is not likely to work. At least, it did not work for Siemens AG (ADR) (NYSE:SI) and Bosch which have recently ended their ventures.

The article Are These Solar Bets Winners? originally appeared on Fool.com and is written by Jacob Wolinsky.

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