In light of the Invesco Solar Exchange-Traded Fund (TAN, Financial) retreating close to 30% from its January high, three solar companies that have good financial strength and solid Piotroski F-scores as of Thursday are First Solar Inc. (FSLR, Financial), Shoals Technologies Group Inc. (SHLS, Financial) and Enphase Energy Inc. (ENPH, Financial) according to the All-in-One Screener, a Premium feature of GuruFocus.
According to CNBC, Fairlead Strategies managing partner and technical analyst Katie Stockton said on the channel's "Trading Nation" segment that solar stocks "had been under pressure along with growth stocks." The Invesco Solar ETF traded on Thursday at around $87.61, up approximately 1.31% from the previous close but down approximately 15.84% for the year to date and approximately 28.85% over the past three months.
As such, investors may find good value opportunities in solar stocks that have strong balance sheets and a good Piotroski F-score. Developed by accounting professor Joseph Piotroski, the F-score grades a company's business operations on a nine-point scale that considers ratios like return on assets, debt-to-assets, asset turnover, change in working capital, gross margin and current ratio.
Piotroski's research revealed that the higher a company's F-score, the stronger its business operations and thus, the higher the potential return of the stock. GuruFocus defines an F-score of 7 or higher as a good score, while F-scores of 3 or below are considered poor.
The Screener listed three solar companies with a GuruFocus financial strength rank of at least 6 and a Piotroski F-score of at least 5, i.e., the stock meets at least more than half of Piotroski's nine criteria.
First Solar
First Solar (FSLR, Financial) designs and manufactures solar photovoltaic panels, modules and systems for use in utility-scale development products. GuruFocus ranks the Tempe, Arizona-based company's financial strength 8 out of 10 on several positive investing signs, which include a strong Altman Z-score of 4.68 and debt ratios outperforming over 65% of global competitors.
First Solar's Piotroski F-score ranks 6 out of 9, driven by factors like increasing returns on assets, lower debt-to-asset ratios, increasing current ratios and increasing gross margins year over year.
Gurus with large holdings in First Solar include Pioneer Investments (Trades, Portfolio), Jim Simons (Trades, Portfolio)' Renaissance Technologies and Stanley Druckenmiller (Trades, Portfolio).
Shoals Technologies
Shoals Technologies (SHLS, Financial) provides electrical balance of system solutions for solar energy projects in the U.S. GuruFocus ranks the Portland, Tennessee-based company's financial strength 6 out of 10: The company has a double-digit Altman Z-score despite interest coverage ratios underperforming over 60% of global competitors.
Shoals' Piotroski F-score ranks 7 out of 9 on the back of increasing returns on assets, current ratios, gross margin and asset turnover from 2019 to 2020.
Enphase Technology
Enphase Technology (ENPH, Financial) designs and produces home energy solutions that connect solar generation, energy storage and management on a single intelligent platform. GuruFocus ranks the Fremont, California-based company's financial strength 6 out of 10 on the back of a double-digit Altman Z-score despite debt ratios underperforming over 59% of global competitors.
Enphase Technology's Piotroski F-score ranks 5 out of 9 on the back of lower debt-to-assets and higher gross margins year over year despite lower returns on assets and asset turnover year over year.
Disclosure: No positions.
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