In the solar sector, good names are everywhere simply because the whole sector is booming. But which one is better for investment? The answer, in my opinion, is Solarfun Power Holding (SOLF).
Solarfun Power Holding has revenue of $497M/year, with a quarterly revenue growth of 528% (the highest in solar sector); more importantly, revenue per share [RPS] is at a high of $10.34 and FPE is only 1.69, yet company market capital is merely $710M (source: Yahoo Finance and Capital IQ). If you look at Evergreen Solar (ESLR), revenue is $78.8M/year, while quarterly revenue growth is 62%. RPS is only $0.8 and PFE is as high as 21.72. However, ESLR's market capital is $1.24B as of yesterday's close; that is 75% higher than Solarfun Power Holding. Shouldn't SOLF have a market cap higher than $1.24B?
Take a look at another example, SunPower Corporation (SPWR). The company has revenue of $906M/year, FPE of 22.1, RPS of $11.8 and the market capital is at $6.5B. If you apply the same scale from ESLR and SPWR to SOLF, Solarfun Power Holding would be over $2.5B. Obviously, it is time to appreciate SOLF stock price during this solar earning season, and remember that the market will never ignore a good company.
Solarfun is experiencing a growth burst. I expect that the company will reach $2B market cap in the next few quarters with such a strong revenue growth. The company has recently rasied about $180M by stock offering, so cash is not an issue any more for the company to grow aggressively. Solarfun investors should not expect a surprise stock offering after a strong quarter, just like what Canadian Solar (CSIQ) did this week. Recently Solarfun signed 47MW deal with Schuco International KG to reach out market in southeast Europe and the Middle East. This is whole new market for Solarfun, and a milestone for the company. This deal only will boost revenue by 30-40% for the coming quarters. So investors should expect continuous strong earning into 2009 (I will not be surprised to see a upped-guidance from the co any time).
Solarfun Power Holding has wide support from different investment groups, such as JPMorgan and Goldman Sachs. Recently China Legend Capital disclosed an investment in Solarfun (see Yahoo News, Wed July 9, 2008). So what is holding back SOLF? The answer is naked shorts; until today 6M shares are shorted, 14% of float. With great earning coming in few weeks, the short squeeze should pick up quickly. I see a $25-28/share easily before earning.
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