Investors interested in Solar stocks are likely familiar with Canadian Solar (CSIQ) and SolarEdge Technologies (SEDG). 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 has a Zacks Rank of #1 (Strong Buy), while SolarEdge Technologies has a Zacks Rank of #4 (Sell) right now. Investors should feel comfortable knowing that CSIQ likely has seen a stronger improvement to its earnings outlook than SEDG has recently. However, value investors will care about much more than just this.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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 10.37, while SEDG has a forward P/E of 13.75. We also note that CSIQ has a PEG ratio of 0.32. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. SEDG currently has a PEG ratio of 0.62.
Another notable valuation metric for CSIQ is its P/B ratio of 1.13. 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, SEDG has a P/B of 3.18.
These metrics, and several others, help CSIQ earn a Value grade of A, while SEDG has been given a Value grade of C.
CSIQ stands above SEDG thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CSIQ is the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Canadian Solar Inc. (CSIQ) : Free Stock Analysis Report
SolarEdge Technologies, Inc. (SEDG) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research