Numbers and alternatives
Now, as the share price of First Solar has drastically increased over the past year, let’s take a look at what this means for new investors and what other choices are out there. First Solar, Inc. (NASDAQ:FSLR) trades at a seemingly cheap P/E of just 10.3 times TTM earnings, but the company is not as cheap as this makes it seem. Due to lower selling prices, margins are projected to erode a bit, with gross margins expected to gradually fall from around 25% to about 17% over the next two years. As a result, First Solar’s earnings are expected to drop from $4.90 last year to $4.13 and $3.29 in 2013 and 2014, respectively. After this, however, margins are expected to stabilize and sales will continue to grow, and the consensus calls for $4.02 per share in 2015.
For those who may be uncomfortable investing in a pure solar play, there are several large corporations with significant solar exposure, such as General Electric Company (NYSE:GE) and 3M Co (NYSE:MMM). General Electric has an entire solar division, which features a variety of solar products, such as solar inverters, thin film solar panels, and a range of services such as smart grid integration. The company provides products and solutions for applications ranging from roof-integrated systems all the way to large-scale power plant design. The company’s size and strength also should provide it with a nice competitive advantage when it comes to materials and labor costs.
3M Co (NYSE:MMM) has been producing solar films for about 30 years, and formally created a renewable energy division in 2009. That same year, 3M Co (NYSE:MMM) began manufacturing its Solar Acrylic Foam Tapes, which are designed to help the cost and durability of solar panel constructions. The company has recently announced plans to build a new manufacturing site for solar materials in China, indicating an expanded interest in the growing sector.
The bottom line is that an investment in First Solar, Inc. (NASDAQ:FSLR) requires a great deal of patience. This company will not make you rich overnight, but represents a chance to invest in what could very well be the next big energy technology while it’s still in its early stages. If all goes well for the industry, an investment in First Solar now could be like investing in oil companies in the early 1900’s. Before jumping in, I would wait until after the company issues its earnings report on Monday, July 29, to get the most up-to-date picture of the state of the company and solar industry.
The article This Is Still the Best Solar Play, Even After the Gains originally appeared on Fool.com and is written by Matthew Frankel.
Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends 3M Co (NYSE:MMM). The Motley Fool owns shares of General Electric Company (NYSE:GE). Matthew is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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