GT Advanced Technologies Is Too Good to Pass Up

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In the past two years, we've seen stocks with any relation to the solar industry be pounded by investors as the industry sorts out who will be winners and who will be losers. There's no doubt that some companies won't survive, but for those that do, the opportunity is tremendous, and some companies are being unfairly punished, in my opinion.

The latest to highlight this market overreaction is GT Advanced Technologies (Nasdaq: GTAT  ) , maker of equipment for the LED and solar markets. Last week the company reported a 30% rise in quarterly revenue to $353.9 million and a 52% increase in net income to $79.1 million, or $0.65 per diluted share. But the results fell short of Wall Street's expectations, and when that happens, your stock usually falls off a cliff.

Cooler heads prevail
If we forget about what Wall Street expected, the numbers GTAT reported should be seen as a positive for the company. Revenue grew from last year, gross margin in the quarter was 43%, net margin was an incredible 22.3%, and the company diversified into a new market last year. Just try to find another company in the solar or LED business that can boast numbers anywhere near that.

From a value perspective, the stock looks even better. The company has $350.9 million in cash, $75 million in debt, and just a $520 million market cap. Earnings per share of $1.45 in fiscal 2012 put the stock at a trailing P/E of three. Yes, you read that right, three! Even after the earnings miss and downward revisions analysts are expecting $1.51 in earnings for fiscal 2013, a forward P/E below three.

Despite all of this, analysts couldn't rush fast enough to downgrade the stock.

Just don't expect explosive growth
I'm not suggesting that GT is going to grow like gangbusters in the next few years, especially in solar. Customers like LDK Solar (NYSE: LDK  ) and Trina Solar (NYSE: TSL  ) are having their own problems generating positive margins and with oversupply rampant in the industry new installations will be few and far between.

GT Advanced Technologies may also be more affected by U.S. solar tariffs than even Chinese manufacturers if the trade war escalates. The company sells most of its product into China, and a negative Chinese reaction could put a damper on demand. So the stock is much more of a value play than a growth play today.

Foolish bottom line
Maybe the market sees a big drop in demand in the future, something that could potentially happen as low-cost competitors enter the market. But the company still has $1.8 billion of sales in its backlog and expects revenue to grow 6% to 12% in fiscal 2013.

The death of GT Advanced Technologies is priced into the stock, but the results show me something different. There will be a fair number of companies that fall by the wayside in both solar and LEDs, I just don't see this being one of them.

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Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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