If you are trying to separate the wheat from the chaff in the clean energy industry, the 'Kapital Wire' has done lots of good work identifying potentially undervalued companies for conservative investors looking for opportunities in Green technologies.
The four companies listed seem like a good starting point in understanding the industry overall. I already know and like Applied Materials and First Solar, so this analyst rounds out my 'stocks to watch' in this area of the Stock Market.
My caveat on the low valuations is because of the fierce competition from China, including alleged unfair trade practices like over producing and dumping solar panels, driving down product pricing and destroying profit margins. China's activity is distorting how the industry grows and matures creating a great deal of uncertainty around valuations...
Panel pricing is becoming like pricing a commodity and gyrating prices on the downside can radically destroy value of your inventories, products and plant and equipment value. For instance some oil companies are profitable when oil is over $100 per bbl but when oil is in the $80's, the same company loses money...so caveat emptor. You need to have a long time horizon and to pick the best managed companies possible. Applied materials let the computer field for this area of manufacturing because of margins shrinking in its previous business. China was the culprit in that business, too.
The collapse of Fremont solar manufacturer Solyndra has dominated the news in recent weeks because it received a $535 million loan guarantee from the Department of Energy. The alleged culprit being cut-rate Chinese solar panels that drove publicly backed Evergreen Solar and Solyndra out of business.
The collapse of Fremont solar manufacturer Solyndra has dominated the news in recent weeks because it received a $535 million loan guarantee from the Department of Energy. The alleged culprit being cut-rate Chinese solar panels that drove publicly backed Evergreen Solar and Solyndra out of business.
4 Clean Energy Stocks Deeply Undervalued By The Graham Number - Seeking Alpha:
If you’re looking for ideas on how to search for potentially undervalued stocks, one method comes from the “godfather of value investing” himself, Benjamin Graham. Graham was an author, professor, and former mentor to Warren Buffett.
Graham created an equation that calculates the fair value of stocks based on two fundamental data points: current earnings per share and current book value per share. The Graham Number = Square Root of (22.5) x (TTM Earnings per Share) x (MRQ Book Value per Share). This equation assumes that a stock is overvalued if P/E is over 15 or P/BV is over 1.5.
Stocks trading at significant discounts to this number appear undervalued.
We ran a screen on stocks in the clean energy industry for those trading at significant discounts to their Graham numbers, appearing undervalued.
Use this list as a starting-off point for your own analysis. List sorted by potential upside implied by Graham number.
1. First Solar, Inc. (FSLR): Manufactures and sells solar modules using a thin-film semiconductor technology. Market cap of $4.64B. TTM Diluted EPS at $5.87, MRQ Book Value Per Share at $42.66, Graham number at $75.06 (vs. current price at $53.77, implies a potential upside of 39.60%). The stock is a short squeeze candidate, with a short float at 34.58% (equivalent to 7.21 days of average volume). The stock has performed poorly over the last month, losing 19.57%.
2. Sims Metal Management Limited (SMS): Operates in the metal recycling industry. Market cap of $2.88B. TTM Diluted EPS at $0.97, MRQ Book Value Per Share at $14.75, Graham number at $17.94 (vs. current price at $13.99, implies a potential upside of 28.25%). The stock has recently rebounded, and is currently trading 13.61% above its SMA20 and 5.57% above its SMA50. However, the stock still trades 13.34% below its SMA200. The stock has had a good month, gaining 21.44%.
3. Applied Materials Inc. (AMAT): Provides manufacturing equipment, services, and software to the semiconductor, flat panel display, solar photovoltaic (PV), and related industries worldwide. Market cap of $15.40B. TTM Diluted EPS at $1.45, MRQ Book Value Per Share at $6.49, Graham number at $14.55 (vs. current price at $11.69, implies a potential upside of 24.48%). Might be undervalued at current levels, with a PEG ratio at 0.87, and P/FCF ratio at 9.07. The stock has recently rebounded, and is currently trading 9.11% above its SMA20 and 8.18% above its SMA50. However, the stock still trades 10.84% below its SMA200. The stock has had a good month, gaining 12.84%.
4. IXYS Corp. (IXYS): Engages in the development, manufacture, and marketing of power semiconductors, advanced mixed signal integrated circuits (ICs), application specific integrated circuits (ASICs), and systems and radio frequency semiconductors. Market cap of $372.92M. TTM Diluted EPS at $1.23, MRQ Book Value Per Share at $7.66, Graham number at $14.56 (vs. current price at $11.82, implies a potential upside of 23.18%). The stock is a short squeeze candidate, with a short float at 5.34% (equivalent to 9.35 days of average volume). It's been a rough couple of days for the stock, losing 10.45% over the last week.
*BVPS and EPS data sourced from Yahoo! Finance, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
This is not my original work. I have no stock position in these companies either.
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