Battery and Solar Stocks Driven By Tesla The recent moves by
Tesla (TSLA) have attracted a lot of attention into the green space
that was tarnished not too long ago by companies like First Solar.
This increase in attention has led to investors taking a few more
speculative gambles in the space, but let's take a look at a few
names that have near term positive potential thanks to higher
Model S Driving The Market
Many of the companies in the solar and battery power space should
be sending not only "Thank you" notes to Elon Musk, they should be
sending him gift baskets stuffed with cash. His success with the
Model S and turning Tesla into an earnings positive company.
With the electric car seeing strong demand, outselling both BMW and
Mercedes Benz comparable models, investors are looking deeper into
the ecosystem of electric power for other places to invest. They
are quickly finding out that choices are limited to battery and
solar stocks. These industries are not with their concerns though,
so let's leverage the Zacks Rank to find the highest quality names.
Ja Solar Holding
(JASO) is a Zacks Rank #2 (Buy) and has beaten the Zacks Consensus
Estimate in two of the last three quarters. Over that stretch the
company has also shown consistent, albeit small, revenue growth.
Each top line result was also better than expected by an average of
about 10% more than the Zacks Consensus Estimate.
Among the issues that investors might have is that the company is
losing money and is projected to lose money throughout 2014. That
said, the estimated loss has been decreasing recently. The Zacks
Consensus Estimate for 2013 stood at -$3.87 in February 2013, and
declined to -$3.55 in March and more recently moved to -$2.74. Over
the same time period estimates for 2014 have also increased from a
loss of $2.03 to a the current level of -$1.43.
From a valuation standpoint, JASO has negative earnings so the old
standby of Price to Earnings is not a meaningful measurement.
Instead we have to look at price to book and price to sales. The
company is trading at 0.4x price to book, well below the 1.3x
industry average while the price to sales shows a more modest
discount to the industry average of 0.3x compared to 0.7x.
What is keeping investors interested in JASO is the mild revenue
growth of 1.5% in 2013 compared to an industry that is seeing -
33.5% revenue growth. At the same time the shrinking loss makes
earnings growth seem wildly better than the 1% industry average and
that rate of growth continues into 2014.
Not Getting Burned
All other solar stocks are carrying a Zacks Rank #3 (Hold), so
picking one or another might not make too much sense. What could
protect an investor looking for more solar exposure is an ETF that
would diversify the risk of holding just one name.
There is no Zacks Rank on the
Guggenheim Solar ETF
(TAN), but you have to love the ticker symbol. You can get more
information on TAN in these articles written by our ETF
Clean Energy ETFs
Go Green with These 3 Clean Energy ETFs.
(ENS) is a producer of industrial batteries. A market
capitalization of $2.3B may seem small, but in the world of battery
stocks, it's a monster. Its profitable and has seen revenue grow
over the last few years.
The valuation of the stock is in line with its peer group. Trading
at 13.4x trailing earnings, the company is at a slight discount to
the peer group average of 14x. The forward multiple of 13.8 is
right in line with the 13.7 peer group average. Price to book and
price to sales both show the stock trading at slight premium to the
peer group average.
Where ENS is set apart from its peers is its net margin. With
several peers struggling to produce any earnings at all, the 7.3%
net margin is well above the 5.6% peer group average.
The stock is a Zacks Rank #3 (Hold) and that is likely because of a
lack of growth in 2013 estimates and a recent move lower in 2014
estimates. Analysts had been moving estimates for 2013 in the right
direction in March and April, but May has been another story. There
was a two cent decrease in estimates for 2013, and a more
surprising eleven cent drop in 2014 numbers. That decrease has
prevented the stock from being a Zacks Rank #1 (Strong Buy) or a
Zacks Rank #2 (Buy).
The Musk Trade
It's not a secret that Home Run Investor added
(TSLA) to its portfolio on February 1, 2013. The idea of electric
cars being here to stay is driving investors to look at other
alternative energy companies. The craze that Tesla and Solar City
have created has driven prices up on many of these stocks, but its
earnings that drive stocks over the long haul. Right now, most
stocks in the space have not seen positive earnings revisions, so
there might be a better time down the road.
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Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor
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ENERSYS INC (ENS): Free Stock Analysis Report
JA SOLAR HOLDGS (JASO): Free Stock Analysis
GUGG-SOLAR (TAN): ETF Research Reports
TESLA MOTORS (TSLA): Free Stock Analysis Report
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