Over the past six months, First Solar’s stock price fell to $217.82. Shareholders have lost 18.6% of their capital, which is disappointing considering the S&P 500 has climbed by 7.9%. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Following the pullback, is this a buying opportunity for FSLR? Find out in our full research report, it’s free.
Why Are We Positive On FSLR?
Headquartered in Arizona, First Solar (NASDAQ: FSLR) specializes in manufacturing solar panels and providing photovoltaic solar energy solutions.
1. Skyrocketing Revenue Shows Strong Momentum
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, First Solar grew its sales at an excellent 12.7% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers.
2. Increasing Free Cash Flow Margin Juices Financials
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, First Solar’s margin expanded by 39.9 percentage points over the last five years. First Solar’s free cash flow margin for the trailing 12 months was 30.8%.
3. New Investments Bear Fruit as ROIC Jumps
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, First Solar’s ROIC has increased significantly over the last few years. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.
Final Judgment
These are just a few reasons why First Solar ranks near the top of our list. With the recent decline, the stock trades at 11.4× forward P/E (or $217.82 per share). Is now a good time to initiate a position? See for yourself in our full research report, it’s free.
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