The Motley Fool

Should Canadian Solar Inc. Be Added to Your Portfolio Today?

Canadian Solar Inc. (NASDAQ:CSIQ), one of the world’s largest solar power companies, announced fourth-quarter earnings results on the morning of March 5, and its stock has responded by rising over 13% in the weeks since. Let’s take a closer look at the quarterly results to determine if we should consider buying in to this rally, or if we should wait for a better entry point in the weeks ahead.

The very strong fourth-quarter results

Here’s a summary of Canadian Solar’s fourth-quarter earnings results compared to its results in the same period a year ago. All figures are in U.S. dollars.

Metric Q4 2014 Q4 2013
Earnings Per Share $1.28 $0.39
Revenue $956.15 million $519.47 million

Source: Canadian Solar Inc.

Canadian Solar’s diluted earnings per share increased 228.2% and its revenue increased 84.1% compared to the fourth quarter of fiscal 2013. The company noted that its very strong revenue growth could be attributed to total solar module shipments recognized in revenue increasing 44.4% to 897 MW compared to the same quarter a year ago. Its triple-digit earnings per share growth can be attributed to the aforementioned increase in revenue and total operating expenses increasing just 23.1%, which led to net income increasing 261.6% to $75.74 million.

Here’s a quick breakdown of eight other notable statistics and updates from the report compared to the year-ago period:

  1. Revenue in the Americas increased 253.8% to $590.8 million
  2. Revenue in Asia and other regions decreased 3.5% to $312.4 million
  3. Revenue in Europe increased 84.7% to $53 million
  4. Gross profit increased 82.6% to $184.87 million
  5. Gross margin contracted 20 basis points to 19.3%
  6. Operating profit increased 156% to $115.95 million
  7. Operating margin expanded 340 basis points to 12.1%
  8. Total assets increased 25.2% to $3.07 billion

Canadian Solar also provided its outlook on the first quarter of fiscal 2015, calling for the following performance:

  • Total module shipments in the range of 1,000 MW-1,030 MW
  • Total revenue in the range of $725 million-775 million
  • Gross margin in the range of 16-18%

Should you be a buyer of Canadian Solar today?

Even after the large post-earnings pop in Canadian Solar’s stock, I think it represents a very attractive long-term investment opportunity. I think this because it still trades at favourable valuations, including a mere 8.4 times fiscal 2014’s diluted earnings per share of $4.11, which is extremely inexpensive compared to its five-year average price-to-earnings multiple of 27.9.

With all of the information provided above in mind, I think Canadian Solar represents one of the best long-term investment opportunities in the market today. Foolish investors should take a closer look and strongly consider beginning to scale in to long-term positions.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in any stocks mentioned.

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