In This Article:
Canadian Solar Inc. (NASDAQ:CSIQ), is not the largest company out there, but it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Canadian Solar’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for Canadian Solar
What's the opportunity in Canadian Solar?
Great news for investors – Canadian Solar is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Canadian Solar’s ratio of 16.01x is below its peer average of 41.64x, which indicates the stock is trading at a lower price compared to the Semiconductor industry. However, given that Canadian Solar’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Canadian Solar look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 4.0% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Canadian Solar, at least in the short term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since CSIQ is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on CSIQ for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy CSIQ. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.