Another solar company found itself in deep mire when it came out with earnings this week. JA Solar (Nasdaq: JASO), which was already feeling the pinch of the industry downturn more than others in the second quarter, saw its losses compound in the just-concluded third quarter. However, JA Solar's shares soared 5% as investors believe the industry has finally found its bottom.

Let's take a look at how the company continues to struggle like the rest in the industry, and what's coming up for the company.

The quarter that was
JA Solar's revenue fell steeply, by 32% from the year-ago period, to $388 million, as the challenging period for the industry continues. The company, along with others in the industry, has been hit by factors including the European debt crisis, oversupply, and swiftly declining prices of solar products.

Also, JA Solar incurred a $22 million loss toward creation of an inventory provision which negatively affected its gross margin, which would have been positive otherwise. But even then, it couldn't match up to Chinese peers like Trina Solar (NYSE: TSL) and JinkoSolar (NYSE: JKS), which posted solid gross margins. Cost-efficiency plays a very important role in the industry and JA Solar is wide off the mark when compared to the other players.

The so-called "positives"
It is no secret that oversupply of solar products has led to a glut in inventories at major players like First Solar (Nasdaq: FSLR) and SunPower (Nasdaq: SPWRA) (Nasdaq: SPWRB). However, it's surprising to see that JA Solar's inventories have actually gone down by 5% from the year-ago period as the company managed to retain its customers. The management believes that a healthy balance sheet and liquidity is behind this positive development as consumers look to partner with leading brands providing efficient products.

However, under the current scenario, this could be a face-saving gimmick, as in my opinion, the going will be difficult for solar companies even next year. Until and unless demand-supply parity is restored and Europe sees better days, the downhill course is likely to continue.

The road ahead
The journey in the coming months is going to be quite bumpy. The entire industry, and especially the Chinese players, will most probably go on suffering as prices keep declining due to oversupply. JA Solar has slashed its full-year guidance and may see itself deeper in the red in the next quarter.

The Foolish takeaway
Investors may believe that it cannot get any worse for the industry. But I think those tracking JA Solar and other solar stocks shouldn't jump the gun. Once the solar shakeout is complete, we will be able to separate the wheat from the chaff.

The best thing you can do at the moment is add JA Solar to your watchlist by clicking here.