If you are an investor looking for a sector that promises to shine brighter than most, it is time to cast your eyes on the solar energy industry. And why would not you? The timing seems reasonable as investing in solar stocks has become increasingly appealing as the global solar power market experiences robust growth. According to Fortune Business Insights, this market is projected to surge from $234.86 billion in 2022 to an impressive $373.84 billion by 2029.
This indicates a compound annual growth rate of 6.9%. Moreover, Precedence Research projects that the global solar power market size will be around a staggering $368.63 billion by 2030, expanding at a CAGR of 7.2% from 2021 to 2030.
Why invest in solar energy?
Why the surge in interest and investment, you might wonder? The answer is a complex yet straightforward amalgamation of environmental consciousness, technological advancements and supportive governmental policies. As the world grapples with climate change and depleting fossil fuels, the shift toward renewable energy sources has moved from a choice to a necessity. Consequently, the market's positive connotation is not just transient, but reflects a durable trend.
Identifying promising solar stocks
I am employing GuruFocus' All-in-One Screener as my analysis tool to identify the most promising solar stocks. This screener is well-regarded for its ability to provide comprehensive insights across multiple financial metrics. For my evaluation, I focus on three key indicators: return on equity (ROE), total revenue growth rate and the forward price-earnings ratio. By utilizing these metrics, I found solar companies that have strong profitability and financial health and offer good value in future earnings.
JinkoSolar
In a solar industry marked by uncertainty and fluctuating trends, JinkoSolar Holding Co. Ltd. (JKS, Financial) emerges as a resilient contender with its standout financial performance in the second quarter of 2023. Despite the challenges the solar sector faces, JinkoSolar continues to position itself as one of the best solar stocks on the market. With a year-to-date return of -19.27%, the company might not have had the smoothest ride, but its recent earnings report is illuminating a path toward brighter days.
JinkoSolar's financials for the second quarter reveal an impressive growth trajectory. The company reported a staggering 62.86% year-over-year increase in revenue, amounting to 30.69 billion yuan ($4.22 billion). What truly catches the eye is JinkoSolar's net income, which surged by an astounding 309.56%, reaching 1.31 billion yuan. Such exceptional growth translated to a diluted earnings of 22.2 yuan per share, marking a remarkable 276.19% increase.
These figures showcase JinkoSolar's ability to weather challenges and exemplify its capacity to innovate and thrive in the dynamic solar energy landscape.
Financial performance and future prospects
JinkoSolar's recent performance cements its position among its solar peers and across the broader market spectrum. With a net profit margin of 4.26%, the company showcases an impressive 228.7% improvement compared to last year. This signifies efficient cost management and an enhanced ability to turn revenue into profit. Further JinkoSolar's operating income witnessed a monumental surge of 1678.65%, amounting to 2.09 billion yuan. Such remarkable numbers solidify the company's prowess in generating revenue and converting it into substantial operational gains.
The company's exceptional earnings performance is further highlighted by its earnings per share, beating estimates by a whopping 179.99% in June. Looking ahead, JinkoSolar's three-year revenue growth rate per share stands at an impressive 33.4, surpassing 87.18% of its competitors in the semiconductors industry. Further, its projected three to five-year revenue growth rate of 22.1 ranks better than 87.41% of competitors, underlining its potential to deliver consistent growth.
JinkoSolar's ROE of 19.61% outperforms 83.97% of its semiconductor peers, reflecting its adeptness at generating returns on shareholder investments. With a forward price-earnings ratio of 4.57, the company appears to be favorably priced compared to 97.84% of similar companies. This suggests the market might not be fully pricing in its growth potential.
While the solar industry faces its share of challenges and uncertainties, JinkoSolar's remarkable earnings report for the second quarter underscores its resilience, innovation and potential for growth. As solar energy gains momentum and the world moves toward more sustainable solutions, JinkoSolar is a notable player. Investors seeking exposure to the solar sector might find the company to be an intriguing addition to their portfolios, considering its consistent track record of revenue growth, solid earnings performance and competitive valuation.
Canadian Solar
It is no secret that the solar energy sector is shining bright in the investment landscape, with increasing consumers and businesses turning toward renewable energy solutions. Amidst this backdrop, Canadian Solar Inc. (CSIQ, Financial) emerges as a promising contender. Although the stock has experienced a slump, declining around 29% over the past six months, savvy investors should consider this a window of opportunity rather than a red flag.
In its latest earnings report for June 2023, Canadian Solar posted revenue of $2.36 billion, marking a modest year-over-year growth of 2%. Where it truly dazzled was its net income, which skyrocketed by an eye-popping 128% to approximately $170 million. Earnings per share followed suit, beating estimates by a whopping 139%. These metrics are robust indicators of the company's operational efficiency and profitability, with a net profit margin of around 7% and an operating income of about $224.1 million, up 93% year over year.
Growth metrics and future prospects
What sets Canadian Solar apart? For one, it is ranked better than 84% of companies in the semiconductor industry regarding its future three to five-year earnings per share growth rate of 25%. Regarding the total revenue growth rate for the same period, it outranks 92% of its peers. Further, it boasts a ROE of approximately 20.5%, ranking higher than 85% of companies in its industry. Couple that with a forward price-earnings ratio of 5.75—better than a staggering 97% of competitors—and you have a solar stock that is not just keeping pace with industry trends, but leading the pack.
While there have been some headwinds, like the company reducing its revenue outlook for the third quarter and the full fiscal year, it is important to note that Canadian Solar is cementing long-term partnerships. The company recently secured a deal to supply 1,200 megawatt-hours of energy storage products to an Arizona project and won a 20-year tolling contract in the same state. In addition, its planned Texas plant won a large module order from the Environmental Defense Fund.
When it comes to investing in top solar stocks, Canadian Solar offers a compelling narrative. Its superior growth metrics, industry-leading ranks and strategic business deals position it as one of the best solar stocks.
