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How Yingli Solar’s Valuation Compares to Its Peers

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Relative valuation

A company’s valuation helps us compare it to its peers. Specifically, the EV-to-EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] multiple represents the cost of a company’s common stock. A higher EV-to-EBITDA multiple implies that the company in question is overvalued compared to its peers.

The EV-to-EBITDA multiple isn’t impacted by a company’s capital structure. As the upstream solar industry is capital-intensive, companies in this industry raise capital through a variety of sources to fund their expansion plans. As a result, the capital structure can vary significantly among them. Thus, the EV-to-EBITDA multiple is useful for comparing the value of one company to that of another.

Among the major upstream solar (TAN) companies, First Solar (FSLR) has the lowest estimated EV-to-EBITDA multiple of 3.9x for 2016. This is followed by Trina Solar’s (TSL) estimated multiple of 6.9x.

Analysts expect that Canadian Solar’s (CSIQ) EV-to-EBITDA multiple will be 9.4x for 2016, compared to SunPower’s (SPWR) multiple of 10.5x. However, Yingli Solar has the highest EV-to-EBITDA multiple of 11.1x for 2016.

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Analyst’s ratings of Yingli Solar

Out of five analysts covering Yingli Solar (YGE), two analysts rate the stock a “hold.” Three analysts rate the stock a “sell,” and there were no “buy” ratings for YGE on August 25, 2016.

According to analysts’ estimates, the consensus 12-month target price for Yingli Solar is $2.95, on August 25. YGE closed at $3.85 on August 25.

Notable recommendations

Among the five firms covering Yingli Solar’s stock, Credit Suisse maintain “underperform” ratings on the stock, with target prices of $2.50 assigned on August 18. Also, Axiom Capital has rated the stock “sell,” with a target price of $0.80 assigned on August 18.

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