We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Should Value Investors Consider First Solar (FSLR)?
Read MoreHide Full Article
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put First Solar, Inc. (FSLR - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, First Solar has a trailing twelve months PE ratio of 14.8, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.8. If we focus on the long-term PE trend, First Solar’s current PE level puts it above its midpoint over the past five years, with the number having risen rapidly over the past few months.
Further, the stock’s PE also compares favorably with the Zacks Solar industry’s trailing twelve months PE ratio, which stands at 154.9. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that First Solar has a forward PE ratio (price relative to this year’s earnings) of 24.5, so it is fair to say that the stock price might appreciate in future.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, First Solar has a P/S ratio of about 2.1. This is a bit lower than the S&P 500 average, which comes in at 3.3x right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, First Solar currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes First Solar a solid choice for value investors.
What About the Stock Overall?
Though First Solar might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of A and a Momentum Score of A. This gives FSLR a Zacks VGM score — or its overarching fundamental grade — of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen no estimate to go higher in the past sixty days compared to five lower, while the full year estimate has seen seven up and no down in the same time period.
This has had a significant impact on the consensus estimate though as the current quarter consensus estimate has fallen to a loss of 23 cents from earnings of 45 cents expected two months back, while the full year estimate has gone up by 21% over last two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
First Solar is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 20% out of more than 250 industries) further strengthens its growth potential. In fact, over the past one year, the industry has clearly outperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
More Stock News: This Is Bigger than the iPhone
It could become the mother of all technological revolutions. Hallador Energy sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Should Value Investors Consider First Solar (FSLR)?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put First Solar, Inc. (FSLR - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, First Solar has a trailing twelve months PE ratio of 14.8, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.8. If we focus on the long-term PE trend, First Solar’s current PE level puts it above its midpoint over the past five years, with the number having risen rapidly over the past few months.
Further, the stock’s PE also compares favorably with the Zacks Solar industry’s trailing twelve months PE ratio, which stands at 154.9. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that First Solar has a forward PE ratio (price relative to this year’s earnings) of 24.5, so it is fair to say that the stock price might appreciate in future.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, First Solar has a P/S ratio of about 2.1. This is a bit lower than the S&P 500 average, which comes in at 3.3x right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, First Solar currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes First Solar a solid choice for value investors.
What About the Stock Overall?
Though First Solar might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of A and a Momentum Score of A. This gives FSLR a Zacks VGM score — or its overarching fundamental grade — of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen no estimate to go higher in the past sixty days compared to five lower, while the full year estimate has seen seven up and no down in the same time period.
This has had a significant impact on the consensus estimate though as the current quarter consensus estimate has fallen to a loss of 23 cents from earnings of 45 cents expected two months back, while the full year estimate has gone up by 21% over last two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
First Solar, Inc. Price and Consensus
First Solar, Inc. Price and Consensus | First Solar, Inc. Quote
This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
First Solar is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 20% out of more than 250 industries) further strengthens its growth potential. In fact, over the past one year, the industry has clearly outperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
More Stock News: This Is Bigger than the iPhone
It could become the mother of all technological revolutions. Hallador Energy sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>