uploads///EV to EBITDA

Where Does Yingli Solar’s Valuation Stand among Peers?

Sheldon Krieger - Author
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Aug. 18 2020, Updated 5:17 a.m. ET

Relative valuation

A company’s valuation helps us compare a company with its peers. Specifically, the EV-to-EBITDA (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 as compared to its peers.

A company’s EV-to-EBITDA multiple isn’t impacted by its 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.

The EV-to-EBITDA multiple is thus useful for comparing the value of one company to that of another. By comparison, the forward EV-to-EBITDA multiple takes into account the company’s EBITDA for the next 12 months.

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Among major upstream solar (TAN) companies, First Solar (FSLR) has the lowest estimated forward EV-to-EBITDA multiple of 7.3x as of December 9, 2016. Trina Solar’s (TSL) estimated multiple is 7.5x, and analysts have estimated Canadian Solar’s (CSIQ) forward EV-to-EBITDA multiple at ~8.6x, as compared to SunPower’s (SPWR) multiple of 11.9x.

As of December 9, 2016, Yingli Solar had the highest forward EV-to-EBITDA multiple of 14.3x.

Analysts’ recommendations on Yingli Solar

As of December 9, 2016, of the four analysts covering Yingli Solar, only one analyst recommended the stock as a “buy,” whereas one analyst gave the stock a “hold” recommendation, and the remaining two issued a “sell” on the stock.

As of the same date, Yingli Solar’s consensus 12-month target price was $3.68. This figure indicates an ~18.0% return potential, considering its $3.12 closing price on December 9.

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