What happened

Shares of solar component manufacturer SolarEdge Technologies (NASDAQ:SEDG) rose 25.6% in August, according to data from S&P Global Market Intelligence. The company has been one of the fastest growing stocks in the solar industry, with shares up 120% so far this year. 

So what

The big catalyst for SolarEdge's fantastic month was another impressive quarterly earnings report. In Q2 2019, revenue increased 43.1% year over year, to $325 million. Net income declined slightly, in large part because of an increased tax burden, but earnings per share soared 69.2% over the prior-year quarter, to $0.66 on a GAAP basis, or 46.8% to $0.94 on a non-GAAP adjusted basis. Shares rocketed upward on the news. 

A girl wearing oversized sunglasses looks upward towards the sun

Shares of top solar component maker SolarEdge have handily outperformed the stock market this year. Image source: Getty Images.

SolarEdge is clearly firing on all cylinders. Margin remained strong in Q2, in the low-to-mid 30s, and management expects it to continue at that level into Q3. 

Toward the end of the month, SolarEdge reported the sad news of the death of its founder and longtime CEO and chairman, Guy Sella, who had been struggling with health problems for quite some time. However, the company had made no secret of Sella's ongoing health issues and had been making preparations for such a situation. In the weeks leading up to Sella's death, SolarEdge installed a co-chairman, an acting CEO, and a chief operating officer.

Now what

SolarEdge's recent performance has been especially impressive considering how anemic growth has been among many solar companies. But its current valuation, at 34 times earnings, has risen sharply as well, from about 13 times earnings at the start of the year. As a result, the company is starting to look a bit overvalued. On the other hand, it's certainly possible that SolarEdge could continue churning out exceptional quarters and see its stock rise even higher, so I wouldn't short the stock or sell if I already owned some. But I'd have to think long and hard before buying in at these prices.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.