Shares of Canadian Solar (NASDAQ:CSIQ) have gained 113% in the past decade. Comparatively, the S&P 500 index has returned 230% since September 2013. We can see that CSIQ stock has trailed the broader markets by more than 50%.
But past returns don’t matter much to current and future shareholders. It’s crucial to identify if the renewable energy stock can outpace its peers and deliver inflation-beating returns over the long term.
Is Canadian Solar stock a buy?
Canadian Solar manufactures solar photovoltaic modules and battery storage solutions. It also develops utility-scale solar and battery-storage products. It has two primary business segments:
- CSI Solar: It designs, develops, and manufactures solar ingots, modules, wafers, cells, and other related battery storage products.
- Global Energy: The segment includes solar and battery storage project development as well as asset management services for operational projects, the sale of electricity, and investment in retained assets.
In the last 22 years, Canadian Solar has delivered 102 gigawatts of solar photovoltaic modules to its base of global customers. It entered the project development business in 2010 and has since built nine gigawatts of solar power projects and over three gigawatts of battery storage projects.
Canadian Solar has 700 megawatts of solar power projects in operation, eight gigawatts of projects under construction, and 17 gigawatts of projects in its early-stage pipeline.
Valued at US$1.8 billion by market cap, Canadian Solar stock is currently trading 56% from all-time highs. CSIQ stock fell 18% in the past month after it missed revenue estimates in the second quarter (Q2).
In the June quarter, Canadian Solar reported revenue of US$2.4 billion, a sequential increase of 39%. The company emphasized top-line growth was driven by a 62% improvement in solar module shipments.
Its adjusted net income also doubled to US$170 million, or US$2.39 per share, compared to the year-ago net income of US$74 million. Analysts tracking Canadian Solar forecast it to report sales of US$2.49 billion with earnings of US$1.52 per share in Q2.
Will Canadian Solar stock go up in Q4 of 2023?
Canadian Solar expects sales in Q3 to range between US$1.9 billion and US$2.1 billion, significantly lower than consensus forecasts of US$2.5 billion. However, it reiterated the previous forecast of sales between US$8.5 billion and US$9 billion for 2023.
Analysts tracking CSIQ stock expect adjusted earnings to grow from US$3.44 per share in 2022 to US$5.74 per share in 2023. So, the clean energy stock is priced at 0.20 times forward sales and 4.9 times forward earnings, which is very cheap given its growth estimates.
With US$2 billion in cash and US$3.2 billion in debt, investors might also be worried about the company’s interest expenses due to the recent surge in bond yields.
But Canadian Solar is among the top five module brands globally, with a presence in 25 countries. In the last 10 years, it has grown shipments by 30% annually. Its gross margins in the last five years have averaged 19.4%, while the net margin has averaged 4.2%.
Wall Street remains bullish on CSIQ stock and expects it to surge over 50% in the next 12 months.
