Why Shares of Hanwha SolarOne Co. Ltd. Popped Today

Is this meaningful or just another movement?

Mar 13, 2014 at 4:06PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Hanwha SolarOne (NASDAQ:HQCL) jumped as much as 30% today after the solar panel manufacturer reported earnings. Shares settled at a 12% gain late in trading.

So what: Fourth-quarter shipments rose 10.8% sequentially to 352.2 megawatts and revenue was up 14.1% to $213.9 million on strong demand from China and Japan. The company still lost $3.6 million, but that was down 95% from a quarter ago and management said it would have posted a profit without some noncash charges.  

Now what: This quarter was really a mixed bag despite the market's euphoria today. Hanwha's 14.1% gross margin is far from leading the solar industry; if not for gains on derivative contracts and changes in the value of convertible bonds the loss would have been even larger in the quarter. On the plus side, $803.8 million in debt actually gives Hanwha one of the better balance sheets among Chinese solar manufacturers. If margins grow and the company can generate enough cash to reduce debt next year it could have enough capital to invest in the next generation of equipment, which will likely start being installed this year. Companies that can't make a profit now risk missing out on the next generation and that's the risk investors take long term.

A stock you should take a hard look at
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Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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