Shares of China-based solar company JinkSolar Holding Co. Ltd (JKS, Financial) are up 47% since reporting its most recent quarterly results last week. This comes after it beat expectations on revenue and earnings. The company's stock price is now up more than 77% since Sept. 8 and about 188% since March 16.
The bull run is supported by impressive earnings growth, which now values the stock at a forward price-earnings ratio of 9.94. That is still very competitive compared to peers in the industry and by extension the market. A price-earnings ratio of about 15 or lower is generally deemed positive relative to the market.
However, for these numbers to be reliable as a buy signal for the stock, the company needs to be sending more positive signals than just the price-earnings ratio.
A look at the key numbers
In the company's most recent quarterly results, earnings per share of $0.93 outperformed the consensus analyst estimate of $0.40. Revenue of $1.12 billion also came in higher than the expected top line of $1.07 billion.
JinkoSolar is the largest solar panel producer in the world. In its Q2 results, it reported total solar panel module shipments of 4,469 megawatts. At the current run-rate, the company could ship more than 13,000 MW by the end of the year.
Module shipments could continue to grow in the coming years with an exciting project pipeline that includes projects in Chile. In June, JinkoSolar announced the planned supply of 60.9 MW of bifacial modules for the first industrial hybrid plant in Chile. In July, it announced a further 126 MW for the expansion of an existing 160 MW solar PV park in Chile.
JinkoSolar also looks strong from a balance sheet perspective with nearly $970 million in cash and cash equivalents.
However, the company's debt to equity ratio is considerably high at 167, which could be a signal of a highly geared company. On the other hand, with long-term interest-bearing debt of just $2.4 billion and cash of nearly $970 million, the debt seems manageable at the current levels, especially compared to many other companies.
Valuation
From a valuation perspective, shares of JinkoSolar have rallied over the last few months to trade at a forward price-earnings ratio of about 9.97. This compares positively to close peers First Solar Inc.'s (FSLR, Financial) and SunPower Corporation's (SPWR, Financial) respective price-earnings ratios of 17.01 and 92.59.
As such, despite JinkoSolar's massive rally over the last six months, the company's stock price appears competitively valued in my view, which leaves some room to run as we move to the tail-end of the year.
Disclosure: No positions in the stocks mentioned.
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