Tuesday, December 28, 2010

CLSA calls Trina and First Solar Cheap, Stocks Shrug (TSL; FSLR)

They are the class acts in the industry but that doesn't move stocks. FSLR is down $1.98 at $129.20, TSL -51 cents at $23.03.
There is something oddly attractive about doing fundamental analysis on these former high flyers, for now though they're "for tradin', not buyin'" but one day they may have what Ben Graham called the "margin of safety".
From Barron's Tech Trader Daily:
CLSA Asia-Pacific Markets solar analyst Mark Heller this morning writes that First Solar (FSLR) and Trina Solar (TSL) shares are undervalued, based on their return on invested capital, which he considers a better valuation metric than revenue and earnings growth.

Heller defines ROIC as net operating profit after tax divided by invested capital. That measure is compared to each company’s weighted average cost of capital (WACC). Rising earnings are only meaningful for a company, Heller notes, if that company’s ROIC is higher than its WACC. If it is, then the faster the earnings growth rate, the higher the earnings multiple should be for the stock, in his view....MORE