Investors interested in stocks from the Solar sector have probably already heard of Canadian Solar (CSIQ - Free Report) and First Solar (FSLR - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Canadian Solar has a Zacks Rank of #2 (Buy), while First Solar has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that CSIQ is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
CSIQ currently has a forward P/E ratio of 6.55, while FSLR has a forward P/E of 14.53. We also note that CSIQ has a PEG ratio of 0.20. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. FSLR currently has a PEG ratio of 1.31.
Another notable valuation metric for CSIQ is its P/B ratio of 0.71. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, FSLR has a P/B of 0.81.
These are just a few of the metrics contributing to CSIQ's Value grade of A and FSLR's Value grade of D.
CSIQ stands above FSLR thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CSIQ is the superior value option right now.