One of the surprise winners in the solar industry this year has been Vivint Solar (NYSE:VSLR). The residential solar power system installer has benefited from a broad recovery in solar stocks, but also from tailwinds like low interest rates and policy changes in states across the country. 

Now that the share price is up, Vivint may not be the value it once was, but can it still be a growth stock? 

Row of homes with solar panels.

Image source: Getty Images.

Vivint Solar's outstanding performance

First, I think it's important to look at just how good 2019 has been for Vivint Solar's stock: It is up 108.7% so far this year. 

VSLR Chart

VSLR data by YCharts

A lot of that performance was propelled by tailwinds from the U.S. residential solar industry overall. In the first quarter, installations grew 6% from a year earlier to 603 megawatts (MW), according to the Solar Market Insight Report 2019 Q2 from SEIA and Wood Mackenzie Power & Renewables. In addition, states like Florida and Texas are finally starting to live up to their potential as residential solar markets, contributing to a growth rate that's expected to fall between 5% and 20% through 2021

As strong as 2019 has been so far domestically for the industry, Vivint Solar's growth outpaced the average. It installed 45.6 MW of solar in Q1, up 12.9% year over year. But that acceleration wasn't the only driver of the stock's performance. 

Value waiting to be recognized

When 2019 began, it was easy to argue that Vivint Solar was in deep value territory from an investment perspective because of what it already had on its balance sheet.

When Vivint Solar signs a customer up for a lease or power purchase agreement, it's agreeing to install a solar system on their roof in return for 20 to 30 years of payments for the energy generated. In that sense, it's a bit like owning thousands of small bonds. 

The company calculates the value of those payments by discounting them to today's dollars at a 6% discount rate. Based on that calculation, the company had $9.48 per share in retained value already on the balance sheet. In essence, this year's stock price rise was a matter of the market cap catching up to the value the company had already built

One change that may have affected how investors look at retained value this year is the falling rate in U.S. Treasuries. A 6% discount rate is aggressive for Vivint Solar to use in its calculations, especially when rates were rising as they were in 2018. But the 10-year Treasury benchmark has fallen from around 2.7% at the beginning of the year to 2.05% now, and if that holds, the company's discount rate may even be a little high. 

How the engine keeps humming

Vivint Solar would love to see interest rates stay low, but that's a factor that's out of its hands. Still, investors will want to watch rates closely. 

Favorable changes to public policy in a number of states are also a key tailwind, particularly in the South. Vivint Solar began selling solar leases in Florida last year, and is slowly growing in Texas as well. As more states become friendlier to residential solar, the company's reliance on Massachusetts and California will subside, and the total addressable market will grow. 

The final factor to watch is component costs. When President Trump implemented solar tariffs in early 2018, it was seen as a hindrance to the solar power industry in the U.S. But since then, the administration has made exemptions for SunPower's high-efficiency panels and all bifacial panels. These exemptions helped lower the cost of solar panels, which benefits Vivint Solar. 

I don't think investors will see Vivint Solar's stock doubling again in the next six months, but it's still a well-positioned company with significant value already on its balance sheet. If it can capitalize on the industry's growth, it could be a steady performer for investors long term, and that's why I'm keeping it as an outperform call on My CAPS page