The solar industry has its ups and downs, which makes it tough to pick stocks in that sector. With so much to consider -- including government policy, foreign competition, technological advances, and competing green-energy sources -- it can be tough to know how a company will perform next month, let alone a few years from now. 

We asked three of our Motley Fool contributors what solar stocks they'd keep an eye on this month, and they came back with Enphase Energy (ENPH -2.30%)Applied Materials (AMAT -3.40%), and SolarEdge Technologies (SEDG -3.93%). Here's why they think you should keep these solar companies on your radar.

A girl wears oversized sunglasses while looking up towards the sun.

Solar energy holds a lot of promise, but industry stocks have been volatile. Image source: Getty Images.

Can Enphase finally become profitable?

Tyler Crowe (Enphase Energy): Ever since the company went public in 2012, this manufacturer of solar energy components has posted net income losses. Even though it has been able to achieve gross margins in excess of 30% at certain times, operating expenses gobbled up any chances of posting a positive net income result. In the most recent quarter, though, the company reported earnings per share of $0.01. 

The turnaround in profitability is largely attributed to the company's seventh-generation microinverter (which converts direct current from sunlight to alternating current in a solar module), as well as the company's recent deal to be an exclusive provider of microinverters to SunPower. Having an anchor customer could be crucial for the company because manufacturing components for the solar power industry has been fiercely competitive over the past few years. Management noted that 84% of all microinverter sales in the fourth quarter were for its most-recent product offering. 

In the coming quarters, investors will likely be watching whether Enphase can maintain profitability. On top of its recent deal with SunPower, the company also recently announced it is launching an energy storage product as part of a partnership it announced during its analyst day last year. While adding energy storage will help to make the company's offerings more competitive, it will also come with higher costs. If the company can maintain profitability while rolling out these new products, it could be a game changer. That said, it is uncharted territory for Enphase that could cause headaches. 

Check out the latest earnings call transcripts for Enphase Energy, Applied Materials, and SolarEdge Technologies.

Here's one "solar stock" you may not have heard of

Rich Smith (Applied Materials): Is Applied Materials a solar stock? I'd argue that at least in part it is. It's best known as a manufacturer of equipment used to make semiconductor chips. But its Applied Global Services (AGS) division also provides solutions for producers of solar products. And AGS accounts for nearly 22% of company revenue, according to data from S&P Global Market Intelligence.

Applied products and services for the solar industry include technology permitting solar manufacturers to produce solar cells more efficiently. Its metallization system is used to apply metals to bare wafers, while its inspection tools help keep tabs on photovoltaic wafer and cell product quality.

Earlier this month, Applied Materials reported strong fiscal Q1 2019 results. AGS sales in particular were up 9%, and operating profits were up 11% on a 70-basis-point improvement in profit margins.

Despite beating earnings, the stock sold off on worries about future quarters. With Applied Materials stock now selling for less than 10 times trailing earnings, pegged for continued 11% profits growth over the next five years, and paying a respectable 2% dividend, I'd say it is one "solar stock" worth watching after its February sell-off.

SEDG Chart

Solar stocks have been all over the place over the past year. SEDG data by YCharts.

Living on the edge

John Bromels (SolarEdge Technologies): Solar component manufacturer SolarEdge Technologies has taken investors on a wild ride lately. In November, after announcing solid third-quarter earnings, shares slid 12.5%. Another December slide put shares down about 6.5% for 2018. But in January, shares jumped nearly 25% as the company announced it was getting into the electric vehicle market through the purchase of a 57% stake in S.M.R.E., an electric vehicle powertrain company in Italy. But February saw another sell-off in the stock, with shares down about 5%. 

All this seesawing comes as the market tries to figure out what's going on with solar. Unlike many other solar companies, SolarEdge doesn't manufacture solar panels. Instead, it makes the components of photovoltaic systems. SolarEdge is the world's leading producer of solar inverters, a crucial system component.

But concerns about a slowdown in solar adoption by China, coupled with domestic concerns about tariff impacts on solar adoption, have investors spooked. In addition, as Tyler mentioned above, some panel manufacturers like SunPower have started to include microinverters on the panels they offer, removing the need for a system inverter. This is probably why investors were so pleased to see that SolarEdge is trying to branch out from its traditional role as a provider of solar system inverters. 

Thanks to the stock's volatility, I wouldn't necessarily recommend buying SolarEdge right now, but it's definitely a stock to keep on your watchlist as you wait for more clarity around the future of the industry.