Solar Part 1: Lunar Eclipse, Solar Power

I hope the lunar eclipse was enjoyable for everyone. Of all the branches of science, Astronomy is the one that anyone can associate with. Who hasn’t looked up at the stars in absolute wonder. If you look up at the sky in the daytime you won’t see any stars. Wait a minute. You do see a single star, one star drowning out the rest, our beloved sun. Daylight is a constant reminder of how strong and how much energy our sun outputs. Solar cells can harvest that light and turn it into electrical power. There are many solar companies on the market, but how do you look past the green fever to find what’s golden?

First, you have to list all the promising solar companies and see where they stand in comparison to each other. As of February 24, 2008.

Company Symbol Mkt Cap (B$) P/E F P/E
SunTech Power STP 5.91 38.21 13.86
SunPower Corporation SPWR 5.49 615.04 22.12
First Solar FSLR 16.64 104.26 41.36
SolFocus Privately held      
Nanosolar Privately held      

There are several apparent trends.

First, the P/E is ridiculously high. The market has a lot of confidence in future earnings. First Solar’s 2007 revenue was almost 4 times its 2006 revenue. These companies are increasing their profit margins while doubling sales each year. The growth potential is enormous. The only thing that could possibly displace solar is nuclear fusion, but we are still at least 30 years away from that. People would rather have solar panels on their roofs than a nuclear reactor in their backyard.

Second, the F P/Es are reasonable, so one can assume that the current stock pricing takes next year’s projections into account. That’s easy to do, because most companies have already sold the panels they are going to make in the future.

Third, the companies with the potential to change the game are privately held. There is so much interest in solar, they don’t need to work very hard to raise the capital they need to start up their factories or develop their technology.

Fourth, the companies are still relatively small if they are truly the future of energy; their market cap should approach that of other energy companies. The future is bright.

In Part 2, I will go over various solar technologies.

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