When Should You Buy ReneSola Ltd (NYSE:SOL)?
ReneSola Ltd (NYSE:SOL), which is in the semiconductor business, and is based in China, received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to $2.46 at one point, and dropping to the lows of $1.52. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether ReneSola’s current trading price of $1.67 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at ReneSola’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for ReneSola
What’s the opportunity in ReneSola?
Great news for investors – ReneSola is still trading at a fairly cheap price. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 5.4x is currently well-below the industry average of 18.28x, meaning that it is trading at a cheaper price relative to its peers. However, given that ReneSola’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of ReneSola look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for ReneSola, at least in the near future.
What this means for you:
Are you a shareholder? Although SOL is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to SOL, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on SOL for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on ReneSola. You can find everything you need to know about ReneSola in the latest infographic research report. If you are no longer interested in ReneSola, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
