Funny how some stocks are valued at such low PEs with growth rates greater than 50 percent a year, while others in industries that have seen massive rises in share prices in almost non-profitable industries seem to be loved by analysts on Wall Street when they simply make a profit. Stocks with PEs in the 100s are recommended with "Strong Buy" with targets double the current trading prices.
For a classic example, look at Seabridge Gold, Inc. Ordinary (AMEX: SA). Seabridge Gold trades at a PE of 356.74, but is in an industry well liked by speculators and Wall Street analysts -- the precious metals sector. For 20+ years, the commodities markets were dead places to invest. These companies traded with PEs of 10-20, and investors were rewarded with PEs similarly (double to triple, though) that of the Solar industry.
Seabridge Gold, currently trading at $33.89 per share, PE = 356.74, has a market cap of $1.4 billion with previous 12-months' earnings of $0.10. This year (12/2011), the company is expected to lose ($0.12), twice that of the previous year. Next year (12/2012), analysts expect the company to lose 33 percent more than 12/2011, or ($0.15). Analysts rate the stock 1.7 (Buy to Strong Buy), and have a mean target for the stock price of $82.52,, more than 2.5 times its current price.
Seabridge Gold currently has no revenue, and has a $1.4 billion market cap on no earnings with analysts rating it a Strong Buy to Buy, an astoundingly high PE in a speculator industry and gold at its 25 year high, but no prospects of truly making money.
Now, Rensola makes nearly $1.90 per share in an industry that is growing by 20-80 percent a year, with revenues in the billions, and a PE under 5. The company is growing capacity and the United States is about to extend significant incentives to increase solar use in this country. Other countries are growing their demand as well, but demand lower prices along with increased supply. Rensola is meeting the demand with increased capacity and selling off higher-cost inventory in preparation for the huge growth in demand.
Now, which stock would you rather own...SOL (Rensola) or Seabridge Gold (SA), where every analyst is saying that the gold stock is the better buy than the solar stock.