The Motley Fool

Will Canadian Solar Inc. Double?

Canadian Solar Inc. (NASDAQ:CSIQ) has a volatile history. Since 2007, its stock has doubled nearly a dozen times. Since oil began to collapse, making renewable energy relatively less attractive, shares have fallen roughly 50%. Today, Canadian Solar trades at just 6.4 times trailing earnings.

Could Canadian Solar double yet again?


Hitting critical scale

Despite a volatile operating history, Canadian Solar has consistently built up an impressive asset base. Last year, revenues topped $3.5 billion, resulting in a $172 million profit. This year, it’s on track to ship 5.5 GW of solar capacity, up from 4.7 GW in 2015.

The company is in an attractive position to capitalize on global solar proliferation. From 2000 to 2010, the world only installed a cumulative 120 GW of solar PV. In 2014 alone, solar PV installations reached 184 GW, comprising 0.5% of total global electricity generation. By 2030, it’s expected to hit 1,835 GW, over 10% of total global electricity generation.

Looking at Canadian Solar’s primary markets, the company appears positioned to take advantage of the highest-growth regions. Key regions like the U.S., Brazil, Japan, and China have much lower solar installations than countries like Germany, Italy, France, and Spain. Canadian Solar already has a 10.3 GW project backlog, most of which is exposed to the highest-growth regions for solar. For example, the company only owns and operates 21 MW worth of projects in Japan. Its backlog there, however, is over 580 MW.

If you’re looking to play the proliferation of solar, Canadian Solar is in the right place at the right time.

Projects are fairly low risk

While investing in a nascent technology can seem risky, most of Canadian Solar’s projects are fully funded in advance, with well-known, reputable partners like General Electric Company and U.S. Bancorp. For example, in the U.S., the company has committed financing for 100% of its $3.1 billion in projects.

Having access to economies of scale and existing relationships with financing partners is a huge advantage in a market driven by price. In 2011, Canadian Solar could only install solar projects at a cost of $1.32 per watt. Last year, it used its growing scale along with falling industry costs to install projects at an average of just $0.41 a watt. While nearly all industry players will experience falling costs, the biggest competitors will likely benefit the most. Canadian Solar is primed to become one of the larger players.

Growth is just beginning

Over the last five years, Canadian Solar grew sales at an impressive rate of 18.3% per year. Over the same period, EPS growth was similarly high at 19.6%. Looking at the market opportunity ahead, it’s likely that it can continue its high-growth pace. Long-term investors will likely expect the shares to have double or triple upside in coming years. However, if you’re looking for our best “double down” stocks, check out our latest picks below.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

Fool contributor Ryan Vanzo has no position in any stocks mentioned. The Motley Fool owns shares of General Electric Company.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.