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CSIQ or JKS: Which Solar Stock is Better Placed Right Now?

Jewel Saha

Growing concerns relating to greenhouse gas emissions during electricity generation from fossil fuels have resulted in increasing usage of renewable and clean sources of energy. Utility operators are making fresh investments for setting up renewable energy-fired utility scale power plants.

The current U.S. Information Administration (“EIA”) report indicates that renewable energy resources such as solar and wind will be the fastest growing source of U.S. electricity generation for at least the next two years.

Solar is one of the fastest growing renewable energy sources in the United States and its contribution to total power generation surpassed contribution of biomass in 2017. At present, solar energy is the third largest renewable energy source, per EIA finding.

Against such a backdrop, in this article, we run a comparative analysis of two stocks belonging to the Zacks Solar industry— Canadian Solar Inc. CSIQ and Enphase Energy, Inc. ENPH — to ascertain which one performed better and is a suitable investment option right now.

Per EIA, the U.S. electric power sector plans to add more than 4 gigawatts (GW) of new solar capacity in 2019 and almost 6 GW in 2020, reflecting a total increase of 32% from the operational capacity at the end of 2018. Owing to this increase, solar energy is anticipated to contribute slightly more than 2% to total utility-scale generation in 2020.

Courtesy of ongoing research and development, the increasing conversion rate of solar panels and modules is making utility scale solar projects competitive compared with conventional energy sources. The tax credit from the U.S. government is assisting the utilities to develop large-scale solar plants.

Earnings Surprise Trend & Y/Y Growth

Canadian Solar surpassed the Zacks Consensus Estimate in all the trailing four quarters, with the average being 51.66%. Its 2019 Zacks Consensus Estimate indicates a year-over-year decline of 25.3%

Enphase Energy’s average positive surprise in the trailing four trailing quarters is 31.67%. Its 2019 Zacks Consensus Estimate suggests year-over-year growth of 420%

Price Movement

Shares of Enphase Energy and Canadian Solar have gained 165.4% and 70.8%, respectively, against its industry’s decline of 17.1% in the past 12 months. The price movement of Enphase Energy is better than that of Canadian Solar.


 

Current Ratio

Current ratio is a metric that measures the company’s ability to meet near-term debt obligation. Current ratio for Enphase Energy and Canadian Solar stands at 1.52 and 1.01, respectively. Notably, the industry's current ratio currently stands at 0.98.

Estimates Movement

The Zacks Consensus Estimate for Enphase Energy’s 2019 earnings has moved up 44.5% in the past 90 days to 52 cents. The Zacks Consensus Estimate for Canadian Solar’s 2019 earnings has moved up 1.7% in the said period to $2.45.

Debt/Capital

Enphase Energy and Canadian Solar’s debt/capital ratio stands at 82.24% and 26.75%, respectively, compared with its industry’s average of 23.47% and the Zacks S&P 500 composite’s 42.83%. Both the companies have higher debt/capital ratio than their industry. However, Canadian Solar wins this round.

Zacks Rank & VGM Score

Currently, Enphase Energy sports a Zacks Rank #1 (Strong Buy) and Canadian Solar carries a Zack Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Both the companies currently have a VGM Score of B. Here V stands for Value, G for Growth and M for Momentum, and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.

The Verdict

Enphase Energy and Canadian Solar are poised to gain from the increasing usage of solar energy for clean electricity production in the United States.

Canadian Solar is ahead of Enphase Energy in only one of the parameters mentioned above. Overall, Enphase Energy has an edge, considering its better rank and upward shift in earnings estimates compared with Canadian Solar.

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