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Tickers in this Article: TSL
Trina Solar (NYSE:TSL) is an up-and-comer in the rapidly expanding solar energy market. The company released earnings yesterday, and much to the market's surprise, beat expectations by 26.5%!

With several Solar stocks still carrying lofty valuations, many investors feel that the solar industry is overvalued and long overdue for a price correction. However, with companies like Trina putting out jaw-dropping numbers on a consistent basis, it appears at least some solar stocks will continue to add value to investors' portfolios for the foreseeable future.

Great Earnings and Solid Growth
Trina Solar is a manufacturer of monocrystalline modules, more commonly known as solar panels. The company was founded in 1997 and is backed by a number of highly respected investors including Merrill Lynch (NYSE:MER) and Milestone Capital. With the world demand for alternative energy on the rise, previously niche sources of energy such as solar are gaining ground as a viable mainstream solution. (To learn about the benefits of solar power, check out Building Green For Your House And Wallet.)

Trina Solar's fourth quarter 2007 earnings crushed expectations, fueled by high demand and increased profit margins. The company's net income tripled to $15.7 million in the fourth quarter of 2007, up significantly from the $4.6 million achieved in the third quarter. Revenue also spiked in the fourth quarter to $101.4 million, up 161% from the third quarter.

The primary catalyst behind Trina's fourth-quarter boom was a boost in production capacity. The company shipped almost three-times as many solar systems and increased sales in France, Greece and Belgium. Trina also tightened up efficiency, increasing its gross margin by 7.1% to 27.2%, a very impressive increase from the 20.1% achieved during the third quarter of 2007.

It's obvious that Trina Solar is on a steady track of growth. It is seeing significant results from market expansion, increased sales and improved operational efficiency. Trina's upper management knows what moves to make to keep the business growing. A 7% increase in gross profit margin during the course of three months is simply amazing, and if Trina continues to expand its global sales efforts, there is no telling how fast or how high this stock will climb. (For related reading, check out Great Expectations: Forecasting Sales Growth.)

The Future's So Bright
As of the earnings announcement on Tuesday, Trina has contracted 100% of its first-half target production for 2008 and 85% of its second half. The company also revealed plans to begin sales in the U.S. and is in the final stages of receiving the necessary licenses.

Trina anticipates that its revenue breakdown for 2008 will be dividend into:
• 34% Germany,
• 24% Spain,
• 18% Italy,
• 10% Benelux (Belgium, Netherlands and Luxembourg)
• 5% from United States.

By breaking into the U.S. market and continuing the effort to reduce production costs, Trina is shooting for the biggest growth market. The rising cost of energy has plagued U.S. business and consumers for years. The company is also looking to reduce its manufacturing costs by roughly 18% by the fourth quarter of 2008. It seems that everyone is eagerly awaiting an affordable and more efficient alternative. America could prove to be a cash cow.

The Bottom Line
The U.S. Green Building Council recently stated that systems which effectively integrate solar technology could reduce the energy requirements of a building by as much as 80%. This is highly attractive to the corporate and consumer markets, both of which have been hit hard by the steady increase of energy costs.

Trina Solar is on the front lines of this industry, and with solid growth and increasing manufacturing and production efficiency, this stock is bound for increased revenues and heavy earnings growth.

For related reading on alternative energy investing, see the Green Investing Feature.

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