Why First Solar Is the Best Company in Sector

High profitability makes First Solar the best pick in the solar industry

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Apr 27, 2016
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Companies in the solar industries have always struggled to report profits. For this reason, I really like profitable solar companies like Canadian Solar (CSIQ, Financial) and First Solar (FSLR, Financial). First Solar, in particular, is my favorite solar company as it has been the most profitable one in the industry.

Since First Solar is profitable, investors can expect it to use it money wisely and continue expanding its business.

First Solar's achievements in terms of efficiency are striking. Its efficiency jumped 22.1% in a laboratory cell in 2016, an enhancement that will soon be functional at its plants. The company now uses a technology that is different from multi-crystalline polysilicon, a thin film of cadmium-telluride, which has plenty of room to progress as opposed to multicrystalline silicon.

The type of semiconductor material being used in the company’s thin film modules has the maximum speculative efficiency of any PV material available in the market currently, expressively greater than crystalline silicon. The efficiency enhancements, along with the lowest intrinsic manufacturing expenses, turns the company into a progressively viable competitor.

The semiconductor material used in First Solar's thin film module technology is manufactured from byproducts of zinc and copper. At present, there have been five world records in efficiency regarding CdTe technology, associated with comparatively slow advancement in single crystal and multicrystalline silicon. The prevailing gap in the company’s top-most research cell of 22.1% and the theoretical limit of 30% offers marvelous opportunity for enhancement.

Researchers recently enhanced the maximum voltage obtainable from a CdTe solar cell, overwhelming a practical limit that has been chased for around 60 years and is crucial to additionally improve efficiency.

Robust balance sheet

SunPower and First Solar are the two companies having healthy yieldco and positive balance sheet. First Solar has $1.5 billion of net cash on its balance sheet, whereas SunPower has $1 billion of net cash.

Maintaining a robust balance sheet is important because it permits the company to preserve more value through yieldcos or holdcos to protect against problems such as those experienced by SunEdison (SUNQ, Financial).

Both SunPower and First Solar also own expressive shares of their joint yieldco, 8point3 Energy Partners. Despite the fact that the yieldco model did not work for TerraForm Power (TERP, Financial) mainly due to liquidity issues over its parent, SunEdison, the yieldco model is working for 8point3.

Conclusion

I always judge solar companies on their profitability, which is why First Solar is my favorite pick in the sector. The company has a very healthy balance sheet as compared to its peers and it should continue growing rapidly in the future.