So, what exactly is involved in calculating solar panels cost in Julian? When thinking about solar power very few people know the way the cost of solar panel systems is actually measured. Or even, for that matter, do we automatically grasp the connection relating to the cost of solar power and the value of solar power. We all know that gasoline prices are in dollars per gallon. We likewise are all aware of approximately how far we’ll be able to drive after spending 40 bucks for a tank of gas. In contrast to a tank of gas, the value of which can be consumed pretty much instantly, solar panels deliver their value across a period of time.
Julian 3 Undervalued Solar Leaders
Recent Macro News
Source: Wallstreetdaily, SCMP, CNN Money
The last 2 quarters have seen influential countries such as china, India and Saudi Arabia announce heavy commitments to investing in solar infrastructure. The news isn't particularly surprising if you are aware of the hazardous pollution levels in China and India. China, the most populated country in the world, claimed that it will spend over $361 billion on renewable energy development by 2020. According to China's National Development and Reform Commission (NDRC), 40% of that spending will go towards solar and that will result in more than 1000 major solar plants, boosting china's solar capacity by 5 times.
Khalid Al-Falih, the energy minister of Saudi Arabia, announced that the oil capital of the world plans to spend as much as $50 billion on renewable energy. The short-term goal is to generate 10 GW of electricity through solar and wind by 2023. Al-Falih remarks that the long-term goal is to have renewable energy account for 30% of the country's total energy consumption by 2030.
Forbes states that India has installed 5.4 GW in 2016, and the Ministry of New and Renewable Energy estimates 15 GW (estimates to around 22% of global demand in 2017) and 16 GW of solar installation for the next two years. The Indian Government aims to accumulate 100 GW of solar by 2022, a feat which will require around $90 billion in total.
The combined future solar spending by these three countries, as well as the rest of the world, is an enormous pie to split between the big players in industry. In this article, I will use fundamental data to compare First Solar (NASDAQ:FSLR), Canadian Solar (NASDAQ:CSIQ) and JinkoSolar (NYSE:JKS), 3 heavily undervalued solar leaders which are well positioned to meet increasing global demand. All financial figures are expressed in USD via Bloomberg.
First Solar's $3.94 billion market cap is by far the largest in this group. First Solar is the only company on this list headquartered in the US and has an American management team. Canadian Solar's $855 million market cap is the next highest. Canadian Solar is based in Guelph, Canada, but the management team and production is predominantly Chinese. JinkoSolar's $542 million market is the lowest of the bunch. The company is entirely Chinese from its headquarters to production.
Revenue & Gross Profit & Net income
Please note that analyst consensus Q4 revenue and net income are used to estimate full-year 2016 revenue for Canadian Solar and JinkoSolar. On a GAAP basis, First Solar reported $2.951 billion in revenue and $704 million in gross profit for 2016. Net income came out to be -$382 million due to a $729 million unusual expense which we believe to be asset write-offs. Canadian Solar is expected to earn $2.871 billion in revenue, $459 million in gross profit and $89 million in net income. JinkoSolar is projected to pull in $3.331 billion in revenue, $647 million gross profit and $125 million in net income. JinkoSolar leads the pack in revenue and net income due to the tremendous demand for solar in China, where JinkoSolar conducts a majority of its business. First Solar boasts the highest gross margin at 24% while Canadian Solar and JinkoSolar have gross margins of 16% and 19%, respectively.
Cash & Debt
Looking at the balance sheets of these 3 companies, it's clear why First Solar is trading at a higher earnings multiple compared to its peers. First Solar currently has more than 10x cash on hand than total debt and actually received $5 million in interest income in 2016. Canadian Solar has $481 million cash on hand and a heavy debt load of $2.344 billion. The company is paying an estimated $52 million in interest expense (first 3 quarters annualized). JinkoSolar has $2.663 billion in debt, the highest of the three and dwarfs First Solar's debt of $188 million. JinkoSolar is estimated to pay a substantial $95 million interest payment in 2016 (first 3 quarters annualized). Although Canadian Solar and JinkoSolar are carrying high levels of debt, one must note that Canadian Solar and JinkoSolar have historically financed their projects with debt rather than equity.
Current Price vs. Book Value
All three solar leaders are currently undervalued relative to their book value. First Solar, with over $2.4 billion in retained earnings, is trading 22% below book value. JinkoSolar has been GAAP profitable for the past 10 quarters and accumulated $339 million in retained earnings during the same period. JinkoSolar is currently trading 28% below book value. Canadian Solar at its current price of $15 is trading just $1 below its book value of $16, but the company has been steadily growing its retained earnings from $47 million in Q4 2014 to $294 million as of Q3 2016.
First Solar, with 22 covering analysts, has 5 buy ratings, 4 sell ratings and 13 hold ratings. First Solar is currently trading right around the analyst target of $35.9. Canadian Solar, with 2 buy ratings, 2 sell ratings and 7 hold ratings, is trading slightly below its price target of $15.2. JinkoSolar, with only 7 covering analysts, has 3 buy ratings and 4 hold ratings. The analyst target of $23.2 represents a 36% upside from the stock's current price.
Although we believe all three stocks have bright futures, we currently hold Canadian Solar only. Although Canadian Solar's P/E is not as low as JinkoSolar's and the company's book value is below both of its peers, we remain enticed by Canadian Solar's diverse project portfolio. Since its inception, 100% of JinkoSolar's revenue came from the People's Republic of China. In 2016, 83% of First Solar's revenue came from the US, 5.4% came from India and 11.7% from various other countries. For the 12 months ending 9/30/2016, Canadian Solar derived 41.7% of its revenue from Asia, 46.8% from America (a good portion of which is from Canada) and 11.5% from Europe + other foreign countries. We believe Canadian Solar's diversified global presence positions the company tremendously to meet the increasing global demand for solar. We will continue to buy on dips and may initiate a position in JinkoSolar in the near future.
Disclosure: I am/we are long CSIQ.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
How to Add Solar Panels to a Flat Roof
It is now the high time to do our own share in protecting Earth and her wonderful creatures.
Our planet is indeed gasping for breath right now, our harmful pollution is indeed choking her slowly and continues to strip off her ozone layer. I think it is about time to give our response to this alarming state of the only planet we live in, by doing our own share of protecting her with doing simple things that will surely stir big difference. For if not, we might be harming ourselves in the years ahead as well, for nature has its own destructive ways of getting back at us humans, the signs of earth's displeasure with inappropriate and harmful activities of humans are now seen and felt all across the globe like the global warming, climate change, acid rain, drought, flash floods and other forms of natural catastrophes.
Antarctic glaciers and ice sheets are melting at a fast rate, the populations of bees worldwide are dwindling down, numerous species of flora and fauna all across the world are becoming extinct as years go by, the ecosystem is continuously harmed, polar bears are getting hungry and the list goes on.
Here are some practical and small ways that could help our planet get a sigh of relief. Collective small efforts by those who are genuinely concerned with earth's welfare will inevitably help her by great leap and bounds.
1. Don’t allow your children to free those colorful balloons in mid-air. Teach your children not to release balloons. For balloons that escaped the grasps of your children that will hover the sky and eventually fell into oceans and seas will be mistaken as (irresistible meal) jellyfish by sea turtles. Sea turtles take a lot of years to mature and unfortunately some of them got killed by eating balloon or plastic bags. Sea turtles are part of the delicate cycle and if their population is affected other species of marine creatures are also under threat.
2. Reduce, Reuse and Recycle. Make it a habit to reduce the things we need or we consume. Purchase only things that we only need and eat only what you can. Let us do our share not to be part of the problem or should I say part of the garbage problem. Reuse all the things that can still be repaired/fixed or those things that are still okay.
Recycle things to conserve our resources, collect old newspapers, books, magazines, used papers, bottles (plastic and glass), and any other things that you could sell in junkyards. There is money in garbage and at the same time we’re doing our part in recycling process.
3. Be kind to trees. As much as possible use forests products and timber very well with optimum efficiency. You may use the back of coupons, use pencils until it become as small as possible, and don’t play with matches. Try to get involved in tree planting in your local conservation program. This could be fun as trees can give us added oxygen, shades for people and a refuge to different insects and birds.
4. Broken scientific apparatus like thermometer, barometers, manometers, sphygmanometers, and float valves and other things that have mercury on it should be disposed properly. Avoid throwing this in rivers for mercury is toxic and poisonous not only to the fishes and invertebrates but to the humans as well.
5. Minimize the use of refrigerators, foam blowers, solvents, aerosol spray propellants, fire extinguishers, and chemical reagents for these contains chlorofluorocarbons (CFCs) that are responsible to the climate change and depletion of our precious ozone layer. Do not burn plastic please this habit is also harmful to our ozone layer.
6. Do not buy exotic and endangered animals. These animals are intended to be in the wild not as mere decorations to your home, pets or playthings.
7. Educate our children, friends and even our local community about the harmful effects of dynamite fishing, illegal logging, animal poaching, over reliance to wood products and hos of other environmental issues.
8. Do not even bother to try eating exotic and endangered animals for they are not intended to be part of human’s diet. Let the other predatory animal do the stalking and eating hehehe you’re not fit to be a lion. One of the most badly hit by human's penchant for delicious foods are the sharks (shark fin soup), sturgeon (sturgeon roes - caviar- are valued for their great taste and one of the most prized eats in the world), snakes, sea turtles and many other animals.
9. Do not patronize things (coats, purse, belt, etc.) that are made up of an endangered animal or animal part (like skin, fur, bones, tusks, antlers, etc.).
10. Be responsible with your garbage, dispose them properly. Also try to use segregation scheme with your trashes, separate those decomposable from those that are not. You may utilize a compost pit to serve as haven for all of your organic trashes and eventually use this as your fertilizer for your backyard garden or trees.
11. Do the traditional way of helping to conserve our environment by virtue of avoiding smoke-belching.
12. Conserve electrical energy and water by employing tips such as regular cleaning of our bulb and fluorescent light in our home, use only appliances when needed, avoiding dripping of water from our faucets, and reporting any case of broken water pipelines to local government.
13. Support any environmental conservation in your community, you may give some donations if this will not bother you to support their cause. You may also join them in their information dissemination drive and campaign as well. You may also do things that can benefit our environment. If you're living in nearby beaches try putting old tires in the sea, this will serve as sanctuary for fishes to lay their eggs and for a place to hide from predators. You may have some vegetation (vegetables, trees or ornamental plants) in your own backyard, for extra oxygen in your area.
14. Support and visit eco-tours near you, these may promote awareness about the importance of ecology to your children, relative and friends.
15. When visiting any tourism site/protected parks please be responsible with your trashes as much as possible adhere to the rules and regulations of the park even if no one is looking at you.
16. Learn how to appreciate nature and her gifts to mankind and support any environmental campaigns that will help nurture and protect the only planet we live in.
This is my fifth entry to the hubchallenge...