2011 will be marked as a year when a fledgling solar industry hit a roadblock and its components saw their shares spiral downward. After massive expansion and supersonic growth in the past few years, this was the year when the industry entered its shakeout mode and we saw some companies fall by the wayside.
However, as I have been saying all along, solar is the next frontier in energy, so it makes sense to scout out the best companies in this space and see if they are worthy of our investment dollars. Today, I will take a look at LDK Solar
What gives us hope
First, let me give you some background on the Chinese company. LDK has been compounding its revenue at the rate of 23% annually over the past three years. Revenue growth over the past 12 months is an impressive 40% as the company performed terrifically well in the earlier part of the year before bad times struck in the form of subsidy withdrawals in key European markets and the European debt crisis.
The above factors dragged LDK to successive quarterly losses and squeezed its margins. However, I feel the coming year may turn out to be better. LDK is a major player in the fast-growing Chinese solar market and more than one-third of its revenue comes from this region. Now China is focusing big time on solar installations and the industry is expected to grow at the rate of 1 gigawatt next year onward. Add to that a potential 50% subsidy to solar equipment providers and we see LDK on the path of resurrection in another year or two.
Relief in sight
Solar stocks bounced back even after the companies reported huge losses in the previous earnings season as investors believe the industry has finally found its bottom and the worst is over. Suntech Power
In spite of the industry being under stress this year, LDK is standing shoulder to shoulder with its bigger peers, and even above some of them in terms of cost efficiency. Sporting a gross margin of 22%, LDK stands toe to toe with Yingli Green Energy
The year has been traumatic for the solar industry, but hopefully the sun will shine on the industry and LDK Solar in 2012. If you are looking for a promising solar stock that will reap rewards in the long run, LDK Solar is one stock you should take a look at or keep track of by adding it to your watchlist by clicking here.
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Fool contributor Harsh Chauhan owns none of the stocks mentioned in the article. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.