Better Buy: Canadian Solar or Jinko Solar?

Of the two industry leaders, Jinko Solar offers the better value.

Apr 3, 2014 at 4:31PM

Souce: Canadian Solar

There's no denying the increasing popularity that the solar industry has enjoyed in 2013. According to the Solar Energy Industries Association, photovoltaic, or PV, installations increased 41% over 2012, and the average price to install a system dropped 15% from 2012. Looking to benefit from this trend, investors may opt to invest in PV manufacturers -- but with so many to choose from, it can be a daunting task to pick just one.

Let's take a look at two industry leaders, Canadian Solar (NASDAQ:CSIQ) and Jinko Solar (NYSE:JKS). Both have made their investors quite happy over the past twelve months, but which one currently offers a better buying opportunity?

CSIQ Chart

CSIQ data by YCharts

Round 1: Yearnings for earnings
Sure, the residential, commercial, and utility-scale markets are increasingly going solar, but the majority of Chinese PV manufacturers have been operating at a loss for quite some time. That's why those who follow the industry take note when a company shows gains. Canadian Solar and Jinko are two companies that have broken through the clouds and rewarded investors with the shining light of profits.

Of the two companies, though, Jinko Solar stands out as the better choice. Its diluted EPS has been growing consistently throughout 2013, whereas Canadian Solar stumbled in the fourth quarter. Jinko Solar also offers investors a better return on equity. Jinko's 12.40% edges out Canadian Solar's 9.86%, but Jinko has been outpacing Canadian Solar, and if the trend continues the same way the disparity between the companies will continuously increase. Considering both metrics equally, Jinko wins the round.

JKS Return on Equity (TTM) Chart

JKS Return on Equity (TTM) data by YCharts

The analysis of Canadian Solar's profitability comes with one caveat. Management is waiting on a court ruling regarding a contract dispute with LDK Solar. If the ruling adversely affects Canadian Solar, then management will have to make a provision in its fourth quarter and full-year 2013 earnings, which would affect the company's profitability.

Round 2: Managing debt
Have Jinko and Canadian Solar taken on too much debt in order to grow profits? Not at all. Over the past year, both companies have managed to adeptly handle debt. Canadian Solar outperforms Jinko in this metric though, ending the year with a debt-to-equity ratio of 2.381, which beats Jinko Solar's 2.680. More impressive, though, is the rate at which it's improved on this over the past year -- nearly 50% better than Jinko.
JKS Debt to Equity Ratio (Quarterly) Chart

JKS Debt to Equity Ratio (Quarterly) data by YCharts

Round 3: Better bargain
Of the two companies, which one is the better value? As of now, Jinko takes that honor.

JKS PE Ratio (TTM) Chart

JKS P/E Ratio (TTM) data by YCharts

Canadian Solar's P/E ratio is considerably higher than Jinko's. Are Canadian Solar's prospects so much greater than Jinko's that it warrants paying such a hefty price? I don't think so. Jinko completed 213 MW of downstream projects in 2013, and it is guiding to complete more than 400 MW in 2014. According to management, downstream projects are an excellent opportunity -- gross and net margins for downstream business exceed 60% and 30% respectively. Furthermore, management believes that it is in a "unique position to directly benefit from the expected growth in the rapidly expanding downstream project business that has only just begun to show potential."

Foolish conclusion...
Both Canadian Solar and Jinko Solar offer compelling arguments for investment, and I'd be happy to have either one of them in my portfolio. At this point, though, I think Jinko is the company that offers a better value.

Are you ready to profit from this $14.4 trillion revolution?
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.


Scott Levine 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

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information