The solar industry continues to grow around the world, yet solar companies continue to struggle to make consistent profits. This year, just as there seemed to be some stability in the industry, new installations and energy demand overall have been disrupted by COVID-19. 

Despite the potential impact, First Solar (FSLR 2.60%) remains one of the industry's leaders, with a rock-solid balance sheet and reliably profitable operations. But is this a great stock to buy, or are there better ways to play solar energy long-term? 

Large solar farm in the desert.

Image source: First Solar.

First Solar's core business

Solar panel manufacturing hasn't been a great business for most companies over the past decade, but First Solar has managed to make it a profitable business. The company generates billions in revenue, and you can see that it's starting to generate a profit again after a few years of taking some manufacturing offline to upgrade facilities. In 2020, the company expected to earn between $3.25 and $3.75 per share before the pandemic hit as even more manufacturing came online.

FSLR Revenue (TTM) Chart

FSLR Revenue (TTM) data by YCharts

On top of the core operations, First Solar aims to develop about 1,000 megawatts (MW) a year in utility-scale solar projects. These are no longer the company's core business because their value can be volatile, but it creates a foundation of demand to build on. 

On a fundamental level, First Solar has solid manufacturing operations and now has $1.5 billion of cash on the balance sheet to fall back on. That's a solid core, but the company may not be the best positioned in solar energy long-term. 

The commodification of solar energy

What's changed in solar energy over the past decade is where differentiation lies in the industry. First Solar used to win because its costs were lower than those of competitors. Today, its costs are on-par with those of most commodity solar manufacturers, and its panels can be less efficient depending on the model. 

This puts a price and margin pressure on First Solar that didn't exist 10 or 15 years ago. And it's resulted in the steady deterioration of the company's margins. 

FSLR Gross Profit Margin Chart

FSLR Gross Profit Margin data by YCharts

First Solar has made up for falling margins by increasing production, but it's clear that the profitability the company has enjoyed may not be as stable as investors hoped. 

Is First Solar stock a buy?

In renewable energy stocks, I think the long-term value will be in companies that own differentiated technology or deploy at a scale that no other company can match. First Solar's technology lead has evaporated, and it may now be behind commodity competitors with more manufacturing scale. On top of that, it's sold or shut down most other parts of its business to focus on manufacturing. 

First Solar may have the best balance sheet in the industry, but it's not a stock I'm jumping into today -- I think its best days are in the past.