Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Trina Solar (NYSE:TSL) jumped 13% today after the company reported second-quarter earnings.
So what: Revenue rose 69% sequentially to $440.7 million and the company's net loss shrunk nearly in half to $33.7 million, or $0.47 per share. Analysts were expecting $375 million in revenue and a loss of $0.57 per share so the company was well ahead of those estimates.
Now what: The impressive figure was that sales were up more than shipments, indicating that module prices were slightly higher in the second quarter. This will have a strong impact on margins, although not even that effect could bring the company to a profit. Even after taking out one-time losses the company lost $15.9 million in the quarter at a time when solar leaders have swung to a profit. It will be a challenge for the company to overcome $1.2 billion in debt, although later this year Trina may actually swing to a small profit if conditions are right. If the company ships 2.3 GW-2.4 GW of modules it now predicts that it will have to increase gross margin to above 15% just to break even, which doesn't make a company worth $550 million a good value. Investors would be better off sticking with companies who are already generating a profit and benefiting from the same trends that Trina Solar is right now.
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Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.