Which Solar Stocks have the Strongest Earnings Trends?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

Stocks with improving earnings metrics are worthy of your extra attention. Click here to discover our CHEAT SHEET stock picks now!

Here’s your Cheat Sheet to how the top 5 solar stocks rank via earnings trends:

MEMC Electronic Materials Inc. (NYSE:WFR): Current Price $4.96

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 2,004 1,164 2,239 2,716 2,530
Diluted EPS ($) 1.69 -0.31 0.15 -6.68 -0.66

MEMC really hit the skids in 2011, but cuts its losses somewhat in 2012.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 717.80 519.20 808.40 601.60 600.70
Diluted EPS ($) -6.46 -0.40 -0.27 0.16 -0.05

Except for a bit of black in the September 2012 quarter, we note that EPS has been consistently negative. We’ll pass on this one…

First Solar, Inc. (NASDAQ:FSLR): Current Price $33.79

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 503.98 1,246 2,066 2,564 2,766
Diluted EPS ($) 2.03 4.24 7.53 7.68 -0.46

We like that First Solar grew its revenue steadily these past five years, notwithstanding the bloodshed in the industry. Unfortunately, EPS took a massive dip into negative terrain in 2011.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 1,006 660.35 497.06 957.33 839.15
Diluted EPS ($) 2.25 -4.74 -5.20 1.27 1.00

Revenue and EPS hit a trough in the March 2012 quarter, but then made a nice turnaround in June 2012. September 2012 brought the loss of some of that momentum. We’ll move on…

SunPower Corporation (NASDAQ:SPWR): Current Price $11.05

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 1,438 1,524 2,219 2,312 2,418
Diluted EPS ($) -1.55 0.35 1.75 -6.18  -1.61

Though sales have moved up steadily, shareholders would rue the negative EPS in 2011 and 2012.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 563.39 494.13 595.90 648.95 678.52
Diluted EPS ($) -0.88 -0.67 -0.71 -0.41  0.18

The latest quarter is somewhat better and we see that sales were up and EPS was back in the black. Will Sunpower make the grade?

Suntech Power Holdings Co. Ltd. (NYSE:STP): Current Price $1.56

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 1,348 1,924 1,693 2,902 3,147
Diluted EPS ($) 1.01 0.66 0.53 1.44 -5.58

EPS headed into negative territory with a vengeance, though sales were up marginally in 2011. It was certainly a rough year for Suntech Power.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Mar. 31, 2011 Jun. 30, 2011 Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012
Revenue ($) in millions 877.00 830.70 809.80 629.00 409.50
Diluted EPS ($) 0.17 -1.44 -0.65 -0.76 -0.74

The books are awash in red here, and we’ll have to give this stock the go-by…

Trina Solar Ltd. (NYSE:TSL): Current Price $5.18

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 301.81 831.90 845.13 1,858 2,048
Diluted EPS ($) 0.735 1.185 1.68 4.18 -0.54

Trina was doing well until 2010, with sales and EPS improving year-over-year. Unfortunately, EPS plunged into the negative in 2011.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 481.90 435.69 349.88 346.05 297.97
Diluted EPS ($) -0.45 -0.93 -0.42 -1.30 -0.81

Not surprisingly, revenue is downhill and EPS is negative over all the last five quarters. We’ll have to drop this stock from the list of probables…

Conclusion

We find that Sunpower Corporation (NASDAQ:SPWR) is the only stock among these five to have improved its earning quarter-over-quarter and turned EPS-positive by December 2012. It therefore wins this round of our ”E-Squared” investment analysis of solar stocks.

“E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our successful CHEAT SHEET investing framework. Don’t waste another minute – click here to discover our CHEAT SHEET stock picks now!