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 the largest solar panel manufacturer in the world Trina Solar Limited (ADR) (NYSE:TSL) jumped as much as 17% today after reporting better than expected earnings.
So what: Revenue was up 25.5% year over year to $558.1 million and beat estimates of $509 million from Wall Street as shipments grew 84% to 1,026 MW. Compared to the year ago period, net income dropped by nearly half to $13.9 million, or $0.16 per share, but was ahead of the $0.09 analysts expected.
Now what: Results were ahead of estimates but there are still some concerns investors should have. Profits were helped by a $5.3 million gain on derivatives and interest expense increased 24% to $11.4 million in the quarter. While shipments were strong, gross margin was still a low 18% and long-term the profit made on each module continues to decline.
Even with the margins we see today, Trina Solar doesn't have much wiggle room to maintain a profit if demand wanes. This is a stock that could do well if the solar market continues to grow and demand exceeds supply, but that dynamic typically hasn't lasted long and with little technology differentiation and low margins this stock is just too risky for me to jump into today.