I recently wrote about ReneSola's(NYSE: SOL) flat performance in its just-concluded second quarter. The solar chip maker used its competitive cost structure to good effect and managed to remain profitable in an industry besieged by tepid product demand and subsidy cuts in important markets.

Let's take a detailed look at ReneSola's fundamentals and examine whether it deserves a place in your portfolio.

Income matters
While the company's compounded annual revenue growth over three years stands at a remarkable 43%, in the last 12 months revenue has jumped an astounding 73%. This is incredible considering that so many in the industry have faltered this year as subsidy cuts in key markets like Germany and Italy have dragged down the prices of solar products.

However, in spite of the weakness in the industry, ReneSola held its ground in the just-concluded quarter as its revenue slid marginally. The company's cost efficiency played a major role behind its flat performance as in-house production of polysilicon helped it to control costs. What's more, ReneSola has come up with its Virtus wafer, which goes into production this year and will hopefully generate more revenue at lower costs. Also, the company is looking to expand its sales force globally along with developing its production capabilities.

ReneSola continues to sell chips. Inventories fell marginally, whereas others in the industry saw their products gather dust in the warehouse.

Let's see how ReneSola stacks up against its peers in this area, which determines how well the company is selling its products.

Company

Inventory Turnover Ratio

Change in Inventory
(year over year)

ReneSola 5.9 times (1%)
Yingli Green Energy (NYSE: YGE) 4.9 times 44%
SunPower (Nasdaq: SPWRA) 4.7 times 72%
JinkoSolar (NYSE: JKS) 7.2 times 136%

Source: Capital IQ, a Standard & Poor's company.

As far as the change in inventories is concerned, ReneSola leads the pack. The company sports a decent turnover ratio as compared to its peers who have reported fatter profits. ReneSola's gross margin and operating margin fell in the just-concluded quarter, weighed down by the weakness in the industry. However, the company is consistent in its sales and will hopefully arrest the decline once the industry improves.

Value
Let's take a look at how the company is valued compared to its peers.

Company

TEV/EBITDA
(TTM)

Trailing P/E
(TTM)

Forward P/E

ReneSola 1.78 2.00 1.64
Yingli Green Energy 3.94 4.25 4.48
SunPower 7.60 NM 8.82
JinkoSolar 3.25 2.93 2.92

Source: Capital IQ, a Standard & Poor's company. TTM = trailing 12 months. NM = not meaningful.

Compared to its peers that have posted large profits, ReneSola's stock is the cheapest. But ReneSola is one of the most cost-effective players in this industry and hopes to generate more profits from its Virtus wafer. With a competitive cost structure in place, ReneSola seems undervalued. What's more, a buyback worth $100 million could give the share price the much-needed thrust it requires.

The Foolish takeaway
ReneSola has withdrawn its guidance for the rest of the year as it moves into the mass production of its Virtus wafer, and this may affect the company in the short run. However, with product-innovation, cost-reduction, and buyback plans in place, the stock certainly excites me. What about you?

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