First Solar (FSLR, Financial), a leading global provider of photo voltaic solar systems ended fiscal 2014 on a good note. The company released impressive numbers on board and the sequential growth in the sales and earnings indicates smooth growth under First Solar’s camp. On the back of an upbeat performance by the company in the fourth quarter, the management is confident of performing better in 2015. It also posted an upbeat expectation for EPS, operating cash flows and booking targets in future. In addition, with strong bookings for future, First Solar seems well positioned as it enters 2015. Let have a look at some of the key aspects.
Looking to improve profitability
First Solar is now focusing on various aspects to improve its profitability. The most exciting thing going on in First Solar camp is the advanced negotiations to form a joint YieldCo vehicle with SunPower Corp. This can be a strong growth driver to the company as it will surely add value to its existing competitive portfolio of assets. This is not enough as after the joint venture, the company is planning to register YieldCo for separate IPO. This can be a wise move by First Solar as it is expected to drive its profitability to a better level in the coming quarters.
This association of the two companies has got other benefits also. With this move, the company is confident of improving its market share well as both of the companies combining, stands strong with strongest balance sheet in the sector and combined strength in utility scale and broad reach across geographies.
Strong demand
Moving on to technology, it seeing some awesome growth in the cell efficiency. To meet the growing demand, First Solar has also accelerated the production of TetraSun product in its manufacturing facility in Malaysia. The company is pleased with the response that it is seeing for this product in the market. As First Solar is expecting the demand to grow in 2015, it will ramp up the production to meet the growing demand.
In addition, the company is also pleased with the tremendous growth that it saw in the growth in the bookings. This has already benefited the company in 2014 which is expected to continue benefiting First Solar in 2015 as well. The impressive book to bill ratio of 1.7 is a clear supporter of this fact. The increase in these bookings and growing demand will surely improve its competitiveness in the module technology in upcoming quarters.
It has also entered a contract with Apple for 25 years to provide commercial power to Apple’s new headquarter, data centres and retail operations in California. This is a great deal for First Solar reflecting the importance of affordable energy to commercial customers.
On the international front, The Company is pleased with the opportunities it is seeing in India. The long term prospects for it also looks promising in India. With the growing interest of the Indian government towards the solar energy, the company has planned to re-invest a commitment to develop 5 GW of solar projects in India by 2019. This is a significant step by the company in the market with tremendous potential for growth.
Conclusion
With a trailing P/E of 15.63 the stock looks reasonable also the earnings growth in the near term are also decent with a forward P/E of 15.79. An impressive profit margin of 11.70% can also attract the investors, helping the company to gain market share in future. All these facts and statistics indicates that First Solar is definitely a good pick as of now.
