First Solar Inc Valuation – February 2017 $FSLR

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how First Solar Inc (FSLR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): First Solar, Inc. is a provider of photovoltaic (PV) solar energy solutions. The Company designs, manufactures and sells PV solar modules with thin-film semiconductor technology, and also develops, designs, constructs and sells PV solar power solutions. The Company operates through two segments: components and systems. The Company’s components segment designs, manufactures and sells solar modules, which convert sunlight into electricity. The Company’s systems segment provides PV solar power systems or solar solutions for systems, which use the Company’s solar modules. The Company provides operations and maintenance (O&M) services to plant owners that use solar modules manufactured by the Company or by other third-party manufacturers. The Company has approximately 30 manufacturing lines around the world and over 2.8 gigawatts (GW) of annual manufacturing capacity with lines having a production capability of approximately 2,500 modules per day.

FSLR Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of FSLR – February 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,479,209,268 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.46 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -4.64% Fail
6. Moderate PEmg Ratio PEmg < 20 8.37 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.57 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.46 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.08 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $3.92
MG Growth Estimate 10.26%
MG Value $113.89
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $56.90
MG Value based on 0% Growth $33.35
Market Implied Growth Rate -0.06%
Current Price $32.85
% of Intrinsic Value 28.84%

First Solar, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.33 in 2012 to an estimated $3.92 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.06% annual earnings loss over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into First Solar, Inc. revealed the company was trading below its Graham Number of $70.77. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 8.37, which was below the industry average of 17.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $12.76.

First Solar, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $12.76
Graham Number $70.77
PEmg 8.37
Current Ratio 2.46
PB Ratio 0.57
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0


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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $3,465,418,000
Total Current Liabilities $1,407,324,000
Long-Term Debt $161,131,000
Total Assets $8,087,660,000
Intangible Assets $151,274,000
Total Liabilities $2,141,901,000
Shares Outstanding (Diluted Average) 103,733,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.89
Dec2015 $5.37
Dec2014 $3.90
Dec2013 $3.67
Dec2012 -$1.11
Dec2011 -$0.46
Dec2010 $7.68
Dec2009 $7.53
Dec2008 $4.24
Dec2007 $2.03
Dec2006 $0.07
Dec2005 -$0.13
Dec2004 -$0.39
Dec2003 -$0.78

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.92
Dec2015 $3.39
Dec2014 $2.51
Dec2013 $2.36
Dec2012 $2.33
Dec2011 $4.10
Dec2010 $5.69
Dec2009 $4.05
Dec2008 $1.93
Dec2007 $0.57
Dec2006 -$0.19
Dec2005 -$0.30
Dec2004 -$0.34
Dec2003 -$0.26

Recommended Reading:

Other ModernGraham posts about the company

First Solar Inc. Valuation – November 2015 Update $FSLR
28 Companies in the Spotlight This Week – 11/1/14
First Solar Inc. Annual Valuation – 2014 $FSLR

Other ModernGraham posts about related companies

Innergex Renewable Energy Inc Valuation – Initial Coverage $TSE:INE
Canfor Corporation Valuation – Initial Coverage $CFR
First Solar Inc. Valuation – November 2015 Update $FSLR
First Solar Inc. Annual Valuation – 2014 $FSLR


The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.






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