Please ensure Javascript is enabled for purposes of website accessibility

A Strong Solar Showing

By Toby Shute – Updated Apr 5, 2017 at 8:57PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Energy Conversion Devices rings up a rich quarter.

Well, I was wrong. Solarfun Power (NASDAQ:SOLF) wasn't the last solar company to report. And in this case, I can say "last but not least," since Energy Conversion Devices (NASDAQ:ENER) had quite a strong outing.

ECD has been around a long time, and it's drummed up Foolish enthusiasm on occasion. This year, the company is finally rewarding true believers. Shares have more than doubled, even as most solar players are roughly breakeven at best.

United Solar Ovonic, the subsidiary we're most interested in, is a leader in the thin-film business through its UNI-SOLAR product offering. These lightweight, flexible laminates are very well-suited to the emerging building-integrated solar materials market. Like First Solar's (NASDAQ:FSLR) thin-film offerings, they're less efficient than traditional photovoltaic cells, but relatively cheap and require no polysilicon.

In the longer term, traditional photovoltaic players may have their day as solar-grade silicon becomes more abundant. But for now, there's a gaping contrast in gross margins. Whereas SunPower (NASDAQ:SPWR) mustered a 24% gross margin in its most recent quarter, and Yingli Green Energy (NYSE:YGE) managed a relatively gleeful 26%, United Solar Ovonic cranked out 34%.

The growth figures here are pretty heroic, but this business is growing from a tiny base. Production was a mere 26 megawatts in the quarter. JA Solar (NASDAQ:JASO), which has a comparable $3 billion market capitalization, produced 66 megawatts in the same period. Still, the fact that ECD is already generating positive operating cash flow at this early stage is very encouraging.

The biggest issue here, as with First Solar, has to be valuation. In fairness, I haven't begun to think about what a fair price for this business might look like, but I wouldn't call the stock neglected by any means.

Energy Conversion Devices sports a middling three-star ranking in Motley Fool CAPS. Think the thin-film player's got fat profits in the pipeline? Weigh in with your own rating right here.

Bask in the glow of further Foolishness:

Fool contributor Toby Shute makes the occasional solar call in CAPS under the name TMFSmashy, but he doesn't have a financial position in any company mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

First Solar, Inc. Stock Quote
First Solar, Inc.
FSLR
$129.85 (-1.46%) $-1.92
SunPower Corporation Stock Quote
SunPower Corporation
SPWR
$24.69 (-1.95%) $0.49
Hanwha Q CELLS Co., Ltd. Stock Quote
Hanwha Q CELLS Co., Ltd.
HQCL

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
339%
 
S&P 500 Returns
109%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.