Investors looking for stocks in the Solar sector might want to consider either Canadian Solar (CSIQ) or First Solar (FSLR). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Canadian Solar and First Solar are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that CSIQ is likely seeing its earnings outlook improve to a greater extent. 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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
CSIQ currently has a forward P/E ratio of 6.15, while FSLR has a forward P/E of 26.39. We also note that CSIQ has a PEG ratio of 0.19. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. FSLR currently has a PEG ratio of 1.13.
Another notable valuation metric for CSIQ is its P/B ratio of 0.90. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, FSLR has a P/B of 1.28.
These are just a few of the metrics contributing to CSIQ's Value grade of A and FSLR's Value grade of C.
CSIQ is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that CSIQ is likely the superior value option right now.
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Canadian Solar Inc. (CSIQ) : Free Stock Analysis Report
First Solar, Inc. (FSLR) : Free Stock Analysis Report
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