Investors with an interest in Solar stocks have likely encountered both 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.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Canadian Solar has a Zacks Rank of #2 (Buy), while First Solar has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CSIQ has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
CSIQ currently has a forward P/E ratio of 6.60, while FSLR has a forward P/E of 17.65. We also note that CSIQ has a PEG ratio of 0.21. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. FSLR currently has a PEG ratio of 1.60.
Another notable valuation metric for CSIQ is its P/B ratio of 0.71. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, FSLR has a P/B of 1.03.
Based on these metrics and many more, CSIQ holds a Value grade of A, while FSLR has a Value grade of D.
CSIQ has seen stronger estimate revision activity and sports more attractive valuation metrics than FSLR, so it seems like value investors will conclude that CSIQ is the superior option right now.