Canadian Solar's Long-Term Prospects Look Strong

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Mar 27, 2015

Canadian Solar (CSIQ, Financial) had a strong end to fiscal 2014. Since the PV industry is gearing up, many PV companies are having a solid run and Canadian Solar is no such exception. The company impressed the investors with solid results leading to good improvement in the market share. The company is now geared up to deliver solid increase in the value to its shareholders’ wealth.

The stability within the PV industry further consolidates Canadian Solar’s position as a Tier 1 global leader in the solar industry. The company is seeing many positive growth signs and is looking to capture these opportunities in future by putting various strategic efforts. Let us have a look at some of these aspects.

The way ahead

Canadian Solar is definitely in a good shape which we can note by a strong performance in the recently reported quarter. The company is looking for better profitability in future. Considering the positive growth across the industry Canadian Solar has also raised its guidance for 2015. On the other hand it is seeing high water marks in terms of solar projects sold and solar modules shipped. This is expected to be a key contributor to Canadian Solar’s success story.

Going forward, Canadian Solar is confident of becoming a leading supplier of solar modules by volume. In order to further expand its reach it has connected large number of utility scale power plants in countries such as Canada, U.S, Japan and China. This will surely help it to deliver good cash flows, also strengthening its balance sheet.

Under its strategic initiatives, the company is counting on acquisitions which it thinks can further drive its growth. The company is nearing acquisition of Recurrent. The investors and analysts are expecting this to be solid step by the company. Recurrent is expected to benefit Canadian Solar in many ways. This acquisition will expand its total project pipeline to 8.5 GW. This is a solid revenue opportunity for Canadian Solar for long term.

However, the company might face certain headwinds due to currency fluctuations which can hurt its margins fractionally. But the company is confident that its improved efficiencies and manufacturing cost reduction efforts will partially offset the lower average selling price which rises due to fluctuations in the currency.

Canadian Solar is largely focusing on maintaining a sustainable business model which can attract investors leading to growth in market share. Besides this, in 2015, the company is seeing solid growth in demand for its high-quality and high-performance solar module products. Considering such as robust demand, Canadian Solar is expecting total shipments in a range of approximately 1000MW to 1030 MW. Further, the revenue is expected to be in a range of $725 million to $775 million. Overall for 2015, Canadian Solar is expecting 60% growth which is a solid growth on a year over year basis.

Conclusion

Moving to the fundamentals, the stock is cheap with a trailing P/E of 8.42 and the forward P/E of 7.47 indicates good growth in the earnings in the near term as well. A profit margin of 8.09% is also expected to attract more investors leading it to gain further market share. The stock can also be a good long term holding as its earnings are growing with a CAGR of 5.00% as compared to industry average of 2.26%. Considering such valuation levels, Canadian Solar is definitely a good pick as of now.