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.

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