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Anatomy of Success: SolarEdge Technologies (SEDG)

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At Zacks we constantly stress the importance of the ranking system, and specifically the select few companies that earn the coveted #1 ranking.  Only 5% of the Zacks Rank universe receives this grade, and over a 1-3 month time frame it has a long history of outperforming the markets.  This system helps investors identify companies both big and small that are poised for near term growth.

While the Zacks Rank is an excellent near term indicator for finding the best stocks, the system also helps you stay in the strongest ones while they continue to appreciate in value.  The example below shows how by following the system, and investor could have realized a +117% gain in less than 8 months.

Example: SolarEdge Technologies (SEDG - Free Report)

SolarEdge Technologies (SEDG - Free Report) provides inverter solution. The company's SolarEdge system offers power optimizers, inverters and a cloud-based monitoring platform. It serves residential solar installations to commercial and small utility-scale solar installations.

On May 12th SolarEdge was added to the Zacks Rank #1 (Strong Buy) list just after it announced Q1 17 earnings where they beat both the Zacks consensus earnings and revenue estimates, and raised Q2 17 revenue, and gross margin guidance.  The company saw revenues increase by +3% quarter over quarter while posting gross margins of +33.6%.  This was also a quarter where its peers saw declining revenues and gross margins due to increased Asian competition.  Further, management introduced new technologies that they believe would produce a 30% reduction in costs.  As of the closing bell on May 12th, the stock price was at $17.65.

Going into its Q2 17 earnings announcement on August 3rd, SolarEdge maintained its Zacks Rank #1 standing, and the company almost doubled the Zacks consensus earnings estimate.  The company reported record revenues for the quarter which were up +18% from the previous quarter and +9% from the year ago quarter.  SolarEdge also announced that they saw growing sales in Europe, which helped diversify its revenue base.  Management once again increased revenue guidance for the next quarter.  This caused analysts to increase both earnings and revenue guidance for Q3 17, and FY 17.  During the quarter, SolarEdge improved its overall market share, and continued to innovate its product suite.  Three months after becoming a Zacks Rank #1 the stock price was up +53.8% to $27.15 per share.  

Then on November 9th, SolarEdge reported Q3 17 earnings where they crushed both the Zacks consensus earnings and revenue estimates.  Not surprisingly they were once again a Zacks Rank #1.  The company saw revenues jump up +22% quarter over quarter, and +30% when compared to the year ago quarter.  Once again, management increased revenue guidance for the next quarter (Q4 17).  This news caused analysts to raise both Q4 17, and FY 17 earnings and revenue guidance.  

The company remained a Zacks Rank #1 into January, and on January 8th, just before they were moved down to a Zacks Rank #3 (Hold), the stock price closed at $38.35, a +117.3% gain from when it first became a Zacks Rank #1 on May 12th.  

The table below shows the price performance of SEDG (in green), and the 12 month forward looking EPS estimate (in red) from when it became a Zacks Rank #1 till the close of the bell January 29th.

Overall, by utilizing the Zacks Ranking system, you can easily identify the elite stocks which are best positioned to beat the market on a consistent basis, and how to stay in those top stocks as they continue to grow.

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