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Comparing First Solar, SunRun, and SunPower’s Valuations

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Dec. 27 2018, Updated 3:00 p.m. ET

Valuation

First Solar (FSLR) stock is trading at a forward EV-to-EBITDA multiple of 4x based on analysts’ earnings estimates for 2019. Peers’ average multiple is at 12x. First Solar’s five-year historical average valuation is ~6x. The stock appears to be trading at a discounted valuation compared to its peers and its historical average. First Solar’s current valuation also looks attractive given analysts’ hefty earnings estimates for the next year.

SunRun (RUN) is trading at a forward valuation multiple of 49x, which is much higher than peers’ average. SunRun looks to be trading at a notable premium compared to its peers, which might concern investors.

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Time to buy solar stocks?

SunPower (SPWR) stock seems to be trading at a fair valuation compared to its peers. Currently, SunPower is trading at a forward EV-to-EBITDA multiple of 12.7x, which is close to its peers’ multiples. Canadian Solar (CSIQ) stock is trading close to a valuation multiple of 7x.

Many solar companies’ shares had concerning performances despite reporting better-than-expected earnings in 2018. Although the companies’ shares seem to be trading at a discounted valuation, investors might find them relatively risky considering the uncertainties. Along with earnings growth, regulations play a big role in driving solar stocks (TAN). Disturbing trade relations between the US and China took its toll on the solar sector in 2018. We will have to see how the trade relations play out in 2019.

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