A Promising Solar Stock for Your Watchlist

Last month, Yingli Green Energy (NYSE: YGE  ) managed to come out with a positive outlook in the midst of the solar shakeout. It was good to finally see some positivity in an otherwise gloomy solar industry, but now is the time to take a closer look at the company's fundamentals and check how it may fare going forward.

The good about Yingli
First, a little background. Yingli has been compounding its revenue at the rate of 31% annually over the past three years. However, revenue growth over the past 12 months grew to an impressive 55% as the company kept pumping up its shipments to add more gloss to its top line.

The primary reason Yingli's stock spiked when it came out with its earnings for the last quarter was the outlook it provided. The company is in position to tap the emerging Chinese market, which is expected to grow to around 3,000 megawatts next year. Yingli plans to grab 30% of the pie. It has been expanding aggressively in the North American market and hopes to capture 15% of it by year's end. Hopefully the upward trend in revenue growth will continue.

A steady ship in a turbulent industry
However, Yingli is not immune to the weakness in the industry. Although the company has seen its top line grow, its margins have taken a hit due to the rapidly declining prices of solar products. That said, its gross margin is still the best among Chinese peers such as LDK Solar (NYSE: LDK  ) and JinkoSolar (NYSE: JKS  ) .

Another important feature in the industry in these distressed times is the piling up of inventories due to oversupply in the market. Yingli performed relatively better in that regard, with a 23% jump in inventories from last year when compared with the astronomical jumps reported by industry leaders such as First Solar (Nasdaq: FSLR  ) and SunPower (Nasdaq: SPWR  ) . This effectively means that the company is finding buyers for its modules even in trying circumstances and will hopefully perform better when the industry stabilizes.

There is a potential roadblock, however. A couple of months back, seven U.S. solar manufacturers filed an appeal against their Chinese counterparts, accusing them of unfair trade practices. They alleged that the Chinese players benefited from subsidies provided in China and hurt the U.S. companies by dumping their products at dirt cheap rates in this country. Yingli's margins could shrink more next year if the International Trade Commission imposes tariffs on the Chinese companies.

The Foolish bottom line
The industry is taking a beating at the moment, but Yingli has somehow wriggled out of the whirlpool and sees brighter days ahead. The sticking point that remains is the solar war between the U.S. and Chinese players. If all goes well, Yingli could turn out to be a winner in the long run as it certainly possesses the fuel to deliver the goods, but as of now, I think this is one stock that should find a place on your Watchlist.

Add Yingli Green Energy to My Watchlist by clicking here.

Fool contributor Harsh Chauhan owns none of the stocks mentioned in the article. The Motley Fool owns shares of First Solar. Motley Fool newsletter services have recommended buying shares of First Solar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (2) | Recommend This Article (8)

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  • Report this Comment On December 22, 2011, at 1:14 PM, Brettze wrote:

    On December 22, 2011, at 12:59 PM, Brettze wrote:

    Travis,, it will be a colossal mistake to continue installing solar on rooftops except commercial buildings . Because solar modules will block beneficial sun warmth from going throught the roof into the attic space to warm up the insulation for the night. This is a colossally oversight in solar efficiency guidelines.. I urge not to put more solar modules on rooftops unless it is above garage .. But never on the rooftops!! You try standing in the shadow of an evergreen then walk out of it .. you will feel the big difference in temperature.. Same principle!! I cut down my beautiful row of tall Italian cypress trees that bloicked sunlight out of my house.. I felt so badly but it is worth it as my home benefits greatly from morning sunlight that help warm up my house... In the frenzy to generate electricity which is understandabe and jobs in tow, I still urge all of you not to allow installations of solar on your rooftop.. First Solar is wise to stop rooftop installations... and focus on utilty scale installations instead. If you still want to install on your rooftop, your heating bill will go up $20 or more a month becuase of the shadow on your roof.. I am not making it up.. it is common sense!!

    Report this Comment On December 22, 2011, at 1:03 PM, Brettze wrote:

    I emailed to First Solar urging them to start exploring solar thermal energy not only to generate electricity but to heat homes like we already have for heating water in swimming pools.. This one is different that is to heat indoors with sunlight reflection all around houses and condos.. It will not be easy as most will be customized to fit each unit . Half of all utilty bills go to heat homes... We dont like setting thermostats too low. Solar heating will allow you to raise the indoor temp to the max !! as high as 120 degrees F if you want.. When you get back home from work, you will replace your clothes to summer clothes.. and sweating!! which is great or what? Sunlight is free and you can put up as many mirrors as you care to get your home so toasty that you wont need firewood except druing foul weather but you might not because fossil fuel prices will come down from falling demand !!

    Report this Comment On December 22, 2011, at 1:06 PM, Brettze wrote:

    I am already using mirrors to heat my home.. I am enjoying it so tremendously!! It beats firewood!! no smoke no pollution no more unsequestered carbon at all! peace of mind !! i am thawing so well... I tore down my fireplace a couple years ago and I never regretted it... I am very happy wiht my solar mirrors!! It is not for heating water,, it is for heating indoor living quarters .. I have a glass sliding door which let in lots lots of sunlgiht and warmth!! Perfect warmth not too lame or too hot.. it is like walking in the desert sun!! Oooooooh , I love it... First Solar !@@@@@@@@@@@@

    Report this Comment On December 22, 2011, at 1:13 PM, Brettze wrote:

    No rooftop solar please,, there is better solar ideas around the corner... mirrors!!! yeah mirrors.. First Solar has to be stupid not to think about mirrors! We can add sun tracking devices to gude mirrors on posts to bounce sunlight all around houses 360 degree around .. We can do more than to face to the Sun , we can also "bend" bounce sunlight back to houses from all around.. Computers and photovoltaics can power the motors necessary to guide and track mirrors to reflect sunlgiht... Solar engineers got to know better than to be stubbornly fiddling with sunlight to electricity conversion which is still too low in efficiency no matter who makes it... We still need photovoltaics , of course but solar energy must get way bigger than any of you would think.. We must grow solar energy way bigger than wind energy. Wind energy is big and growing which is great but solar energy is way bigger yet we sat on photovolatics while ignoring mirrors.. I dont mean brittle glass mirrors.. We can use different safer materials to put shiny coatings on and there is no danger of getting cut or bleeding to death from broken glass mirrors.. Why we still refuse to make them, reeks of conspiracies or protections for fossil fuel industries and producers and investors.. Investors still hold trillons of dollars in them and they want us to keep buying more and more . We will still use them but they want more and more and m ore pollution .. We already watched Inconvenient Truth and we still dont know what we must do ... to make more mirrors to increase solar energy. I mean safe mirrors that will not injure anybody or animals.. it is perfectly safe... It will not blind anyone because of computers ... Computers are smart enough not to blind people with mirrros.. Do I need to go on and on and on !! Get real!1 We cannot just produce more and more and more fossil fuels and we know better than that.. Get a life!! Travis!!

  • Report this Comment On December 28, 2011, at 10:39 AM, oldogartist wrote:

    Well ... where to start ... depending on locale, the shading received from the modules is actually very beneficial during many months of the year on a house roof ... but the modules do generate heat while operating ... which does do a little warming during the winter months. What all need to do is be sure that enough insulation is in the attic spaces and an R19 is not enough. Get it up to an R30.

    The idea of getting sunlight into the house during colder months is the foundation of passive solar ... just like having trees with leaves to block sunlight in the summer months to help a house stay cooler.

    Put the modules on your house and be happy ... but get the insulation where it needs to be.

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