The worldwide demand for energy continues to grow while at the same time, environmental concerns have put pressure on traditional sources such as fossil fuels. As governments and individuals alike strain to find a balance between these two conflicting needs, alternative energy companies are being brought into the spotlight.
One of the most popular energy sources for electricity will likely be solar power. Governments in many developed nations are pushing subsidies to stimulate demand as well as innovation in this field, and manufacturers of solar power equipment are taking advantage of these tailwinds.
Trina Solar (TSL) is one company taking advantage of the demand. The company is a supplier of components to make solar panels and has become increasingly vertically integrated. Analysts seem to agree that in order to remain competitive in the field, companies should control as much of the manufacturing process as possible from procuring the raw materials to producing the ingots, to manufacturing the wafers, to assembling the cells, and finally compiling the modules.
Trina has taken great strides to be involved in all parts of the process. The company has been able to manage the rising prices of silicon by purchasing recycled silicon at a significant discount. It already claims to have agreements for the purchase of half of its needs for 2008 which adds some stability to the process in the face of a volatile market for raw materials. In early June, the company raised $156m in a secondary offering of stock and will use most of the proceeds to beef up their production lines presumably adding functionality on the downstream side of the manufacturing chain.
Currently, the primary users of solar power are customers who are already on a public utility system, but want to supplement their consumption using solar energy. Trina noted in their prospectus that solar power production is expected to grow at a 44% compounded annual growth rate (CAGR) through 2010. The growth prospects are shared by the few analyst that follow the company as EPS are expected to grow from $0.52 in 2006 to $1.61 in 2007 and likely $3.72 in 2008. If these projections are relatively close, the stock is actually trading at a very reasonable level especially considering the robust long-term growth prospects.
While i currently do not have a position in TSL, I have participated in both the IPO and the recent secondary and am considering taking a longer-term position as the stock seems to be finding support after supply concerns begin to abate. The trading is likely to be a bit volatile as policy news can really affect the sector, but the risk to reward ratio appears very attractive and worth the time and effort to warrant deep research and possibly investment of capital.
FD: Author does not have a position in TSL
Additional Reading:
Barrons believes solar sector may look frothy
Financial Nirvana comments on the sector offering more stock.
Gone are the days when banks would ask for a heavy credit report to provide customers with the home equity loans. The credit card consolidation is the new service provided by the banks to add convenience to the clients. The cheap car insurance and health insurance is also a feature in the banking sector. Now availing a mastercard is not a big deal with customer friendly services offered by the banks. The mortgage brokers don?t ask for high stakes to give loans.
Trina Solar Ltd. (TSL)
July 2nd, 2007 at 2:08 am
Zach,
Interesting article. I fully agree, and in fact almost purchased some the other day. The stock seems very volatile on some days, I guess the large volume is to blame for that. Do you think more analysts will eventually cover this company? Will that boost the price a little?
–Doug Greene
http://www.tomorrowsnewspaper.blogspot.com
July 8th, 2007 at 5:49 pm
just thinking out loud, did you ever examine large industry players such as STP SPWR and that wind propeller blade wonder Zoltek-ZOLT? bb
July 13th, 2007 at 2:41 pm
Doug – It definitley has more than its share of volatility – One way to help with that would be to set up a covered call position buying the stock and selling say September calls at the money. The premiums are very high so you give yourself a bit of cushion if the stock backs off. By the way – i enjoy reading your blog!
bb – i’m not familiar with ZOLT, but i am watching STP and SPWR.
June 19th, 2011 at 7:54 am
The company is a supplier of components to make solar panels and has become increasingly vertically integrated. The company has been able to manage the rising prices of silicon by purchasing recycled silicon at a significant discount. The credit card consolidation is the new service provided by the banks to add convenience to the clients. The cheap car insurance and health insurance is also a feature in the banking sector. Now availing a mastercard is not a big deal with customer friendly services offered by the banks. The premiums are very high so you give yourself a bit of cushion if the stock backs off.The printing business and also the web have turn into so carefully linked that its endurance at this point generally depends on powerful internet marketing, and use of a variety of internet companies, to move the printing content online, and help to make its presence additional world-wide. The over the internet printing and publishing industry, in light connected with Printplace, will continue to glow, despite the possibilities towards it for the period of economic slowdown. The publishing marketplace as seen with online printing coupons largely emerged unaffected, because it received an via the internet profile which allowed it to pull through the bigger part of cutbacks, and be considered a hit with intercontinental viewers. Although sending the books to international destinations seems to have endured, offering all of them on-line inside the type of e publications has developed to become much more financially permanent and simpler. Even so, a massive component of the human population still likes to hold the ledgers and be involved in its pages, rather than browse online.
June 19th, 2011 at 7:55 am
The company is a supplier of components to make solar panels and has become increasingly vertically integrated. The company has been able to manage the rising prices of silicon by purchasing recycled silicon at a significant discount. The credit card consolidation is the new service provided by the banks to add convenience to the clients. The cheap car insurance and health insurance is also a feature in the banking sector. Now availing a mastercard is not a big deal with customer friendly services offered by the banks. The premiums are very high so you give yourself a bit of cushion if the stock backs off.The printing business and also the net have turn into so carefully associated that its endurance at this point mostly is dependent upon powerful on the web marketing and advertising, and utilization of numerous web services, to move the printing multimedia on the net, and try to make its presence extra world wide. The internet printing and publishing sector, in respect regarding Printplace, will continue to shine, regardless of the probabilities towards it through recession. The printing and publishing industry as seen with online printing coupons typically surfaced unaffected, as it had an on the web profile that authorized it to pull through the larger component of deficits, and be considered a huge success with global viewers. Though shipping the books to international regions seems to have struggled, selling these products on-line within the form of e textbooks has developed to be more financially tenace and less complicated. However, a huge component of the population still favors to hold the account books and be involved in its pages, instead of scan online.
November 2nd, 2011 at 8:28 pm
I’ve said that least 798034 times. The problem this like that is they are just too compilcated for the average bird, if you know what I mean
January 5th, 2012 at 3:15 am
I’m quite certain I¡¯ll learn a lot of new stuff right here! Good luck for the next!