Shares of Canadian Solar (CSIQ, Financial) had a good rally after touching its 52-week low in January and rose around 80% in just three months. The resilience of the stock is quite remarkable, which is an indicator of investor confidence in the company. And to top this, the solar panel maker reported some solid numbers in the fourth quarter, with yearly growth in both revenue and profits. There has been a lot of positive talk around the solar industry lately, and with the increasing demand for green energy in the days to come, the sector looks poised for growth. Starting with its numbers, let’s see in detail what can we expect from this stock in the coming months.
Strong growth
During the quarter, its revenue rose 84.1% from a year ago to $956.2 million, while earnings increased to $1.28 a share, compared to $0.50 last year. Also, the company successfully completed and connected a large number of utility-scale solar power plants during the year at various locations such as Canada, U.S., Japan, and China. The company has closed the year with a strong balance sheet and it seems to have even better prospects in the days to come.
These higher expectations stem from its growth initiatives, which look quite promising. In this direction, the company recently completed the acquisition of Recurrent Energy LLC, a leading North American solar energy developer. The deal will expand Canadian Solar’s global solar project pipeline by 4 GW to 8.5 GW and also enhance its late-stage solar project pipeline to 2.4 GW. This seemed to be a wise investment for the company as it will bolster its late-stage project pipeline in low risk geographies.
“Recurrent's seven late-stage projects have long-term power purchase agreements with investment grade counterparties, and are expected to generate significant US dollar denominated cash flow after completion, serving as the cornerstone for the launch of Canadian Solar's own Yield-Co in the quarters ahead, recent reports say.
The solar companies have devised an even more interesting way to woo its shareholders by developing a YieldCo. Canadian Solar is analyzing all the options to launch its renewable energy, YieldCo, which in fact is the real deal for investors. The YieldCo. will own and operate its assets and most of the cash flow generated will be paid in the form of dividends. This is an interesting strategy to attract investors in this segment and many of its peers such as SunEdison, Yingli Green Energy and others have done the same.
In addition, demand for its solar modules increased even in the first quarter season, which is traditionally considered to be weak. The company expects its first quarter shipments to be in the range of 1,000 MW to 1,030 MW generating revenue of $725 million to $775 million, which represents a 60% growth on a yearly basis.
Conclusion
As mentioned before, these growth initiatives adopted by the company offer a promising outlook for the years to come. Currently it has a trailing P/E of 8.4 and has an improving forward P/E of 7.81, which indicates of improving earnings ahead. Moreover, the stock has shown significant resilience in the past and coupled with its strong moves, we could expect more upside in the days to come. Therefore, in the light of these facts investors can consider adding Canadian Solar to their portfolio.
