Is SunPower a Risky Investment?

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With shares of SunPower Corporation (NASDAQ:SPWR) trading at around $11.45, is SPWR an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Many wise investors will begin reading this article, see it pertains to a solar company, and immediately think that the only correct position would be a short position. However, that’s not necessarily the case for SunPower. Are there negatives? Of course. These negatives include decreased average selling prices, increased competition, high costs, and substantial weakness in Europe, Africa and the Middle East. However, the list of positives is longer:

  • Strength in the residential and commercial markets
  • Increased consumer demand
  • Revenue growth
  • Strong performance in the Americas
  • Moderately strong performance in the Asia-Pacific
  • Gross margin increase
  • Positive earnings surprises in four consecutive quarters
  • Most efficient panels in market (residential)
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Up until this point, it looks as though SunPower would be the top option when it comes to solar. However, we should look at the numbers first. The chart below compares fundamentals for SunPower, Suntech Power Holdings (NYSE:STP), and First Solar (NASDAQ:FSLR). These three companies differ in size. SunPower has a market cap of $1.36 billion, Suntech has a market cap of $80.37 million, and First Solar has a market cap of $2.38 billion.

SunPower

Suntech Holdings

First Solar

Trailing P/E

N/A

N/A

N/A

Forward P/E

20.73

N/A

8.34

Profit Margin

-14.56%

-44.18%

-2.86%

ROE

-31.04%

-86.50%

-2.66%

Operating Cash Flow

 $28.90 Million

$215.50 Million

$762.21 Million

Dividend Yield

N/A

N/A

N/A

Short Position

25.20%

N/A

35.40%

 

The fundamentals don’t exactly inspire confidence, but let’s take a look at some more important numbers prior to forming an opinion on this stock…

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