At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

Don't be a hater
And speaking of sorry, I think the securities analysts at Susquehanna owe investors a big fat mea culpa, for bumming us out and ending the week on a down note. This morning, Susquehanna initiated coverage on a raft of alternative energy plays, and the disdain was almost palpable:

On Veeco Instruments (Nasdaq: VECO): "Clean Tech, excluding Wind, is still going through the learning curve ... looking to penetrate new end market applications (LEDs)." Until LEDs hit the mainstream, Susquehanna thinks you should sit out this nascent technology and stick Veeco in "neutral."

Likewise with Power-One (Nasdaq: PWER), Advanced Energy Industries (Nasdaq: AEIS), MEMC Electronic Materials (NYSE: WFR), and Suntech Power (NYSE: STP). Susquehanna's not satisfied that the stock prices here represent real bargains and assigns the stocks one and all neutral ratings on its scorecard. The analyst feels even less charitable toward Chinese solar star Trina Solar (NYSE: TSL), JinkoSolar Holding, and Solar Voltaic as well -- each of which Susquehanna initiated with a "negative" bias.

Fact is, there's only one stock in the entire alt-energy universe that Susquehanna likes today: First Solar (Nasdaq: FSLR). That one, Susquehanna thinks can go to $180.

Let's go to the tape
There's just one thing wrong with Susquehanna's recommendations: namely, the fact that the analyst is usually wrong on its recommendations. Here at CAPS, we've been tracking Susquehanna's performance for more than four years now, and what we've discovered is that, on average, 55% of its recommendations fail to beat the market.

Now admittedly, the analyst could break its losing streak here. After all, First Solar looks mighty attractive on the surface. A 16.6 P/E, a 23% projected growth rate -- what could be wrong with that?

Glad you asked. Because in fact, three things could be wrong with that. First, the plain vanilla P/E ratio-versus-growth approach doesn't take into account the significant U.S. regulatory risks threatening First Solar's "solar farm" business, which (the much better analysts at) Axiom Capital highlighted for us earlier this year. Second, it ignores the risk of heightened environmental regulation in the European Union, which Hapoalim Securities told us about before that. Third and finally, it doesn't take into account the fact that, when it comes to valuation, First Solar really isn't as cheap as it looks.

You see, the simple fact of the matter is that First Solar generates significantly less cash from its business than its GAAP earnings statements suggest. Over the past 12 months, free cash flow at the company has amounted to just under half First Solar's reported "net income." With the result that at a P/FCF ratio of 33, First Solar looks to be considerably more overvalued than its P/E ratio would suggest.

A better way to play alt-energy
At least two of the stocks Susquehanna panned this morning have recently appeared on my value-seeking radar for the opposite reason: They're cheaper than they look. (And they already look pretty cheap.)

Veeco Instruments, with $183 million in trailing earnings, actually generates cash at a rate closer to $212 million per year. Cheap-seeming already at a P/E of less than 10, the company turns out to be even more of a bargain when you realize that it's selling for barely eight times FCF (and growing at a 13% clip.)

Similarly, Power-One looks right tasty at a price of just 12 times earnings -- and more delicious yet when you notice that this juice converter generated well over 50% more free cash flow than it reported as GAAP "profit" over the past year. With a price-to-free cash flow ratio of less than six, the company doesn't even need to grow nearly as fast as the 26% annual growth rate analysts have it pegged for to absolutely obliterate the S&P 500's returns going forward.

Foolish takeaway
Susquehanna's focus on the obvious, high-profile alt-energy play is leading it astray today. Fact is, there's plenty of value in alternative energy stocks, if you know where to look. Fact is, Power-One and Veeco both deserve your attention -- but at today's prices, First Solar does not.

First Solar and Suntech Power Holdings are Motley Fool Rule Breakers picks, but Rich Smith does not own shares of (nor is he short) any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he was recently ranked No. 594 out of more than 170,000 members. The Motley Fool has a disclosure policy.

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