Small Cap Strategist is published by Crystal Equity Research an independent research resource on small capitalization stocks. Follow along as we discuss the most recent trends in the small-cap sector, investigate interesting companies and pan a few not-so-promising stocks.
week Canadian Solar
bagged another solar module supply agreement-this time on the home turf of
some of its staunches competitors.Of
course, the company has its own manufacturing foothold in China.Canadian Solar is to supply its solar modules
to China Three Gorges New Energy Company to a 100 megawatt solar power project
in Guazhou County in Gansu Province.The
modules shipments will be complete by the end of the December 2013, suggesting
all the sales will end up recorded yet in the current fiscal year.
Three Gorges sales is not an isolated good news story.Last month Canadian Solar started work on a
100 megawatt utility-scale solar farm in Ontario for Samsung RenewableEnergy.The company also won a contract
to supply solar modules for a solar power project in Saudi Arabia being built
by Saudi ARAMCO, one of the world’s largest crude oil producers.
trio of analysts who have published estimates for Canadian Solar already
through the company could deliver $2.0 billion in sales and $0.47 in non-GAAP earnings
per share in the current fiscal year.This represents a bit over 50% growth over the prior year.This not a bad feat in a sector that was at
one point nearly written off as competition from low-price photovoltaic modules
from China threatened to put North American and European producers out of
be sure, Canadian Solar experienced a sharp drop in sales in the last year and
even the first quarter of 2013.However,
this year beginning in the June quarter the company turned things around,
registering the first year-over-year increase in quarterly sales in three
years.It now appears possible for the
company to get back to set a record in sales value.
have been improving as well-at least the net loss has been getting
smaller with each reported quarter.The
company has reported strong cash generation in the past as well as net
profits.Investments in new solar
projects are reported in operating cash flows.Because of the size and long-term nature of some solar development
projects, operating cash flow can be dramatically impacted.In 2012, a solar project under development
took a $300.7 million bite out of cash flow from operations.
if profits spark investor interest in CSIQ, they will need to temper their
enthusiasm, at least in the short-term.A
review of historic trading patterns in CSIQ suggests the stock has recently
risen to over-bought territory.It would
be prudent to wait for a period of trading weakness to take on long positions
in the stock. Still at the current price
level the stock is trading at 10.0 times the 2014 consensus estimate.While this is above the company’s current
growth rate it is still an attractive valuation.For an investor with a long-term investment
horizon the current price level justifiable.
Neither the author
of the Small
Cap Strategist web log, Crystal Equity
Research nor its affiliates have a beneficial interest in the companies