The rising number of solar installations because of new laws mandating rooftop solar on new homes has been a recent positive for the solar industry. Also, a dramatic decline in the cost of solar energy is contributing to the sales surge. Solar energy is expected to be the lowest-cost source of bulk power in the coming years.
According to a U.S. Energy Information Administration (EIA) forecast, 15 GW of solar photovoltaic (PV) generating capacity in the electric power sector will be added in 2021, with an additional 12 GW forecast for 2022.
In fact, with federal subsidies now making solar panel installation much more affordable, and with President Biden’s plans in his $2 trillion infrastructure package to drive carbon emissions to zero, investors have grown increasingly interested in the sector. While several companies are well positioned to capitalize on its potential, many continue to be unprofitable. So, we think it’s best to avoid Sunnova Energy International Inc. (NOVA), ReneSola Ltd. (SOL), and SolarWindow Technologies, Inc. (WNDW) because they currently possess weak financials.
Sunnova Energy International Inc. (NOVA)
Founded in 2012, NOVA is one of the leading U.S. residential solar and storage service providers. It provides maintenance, monitoring, repairs and replacements, equipment upgrades, on-site power optimization, and diagnostics services. The company operates a fleet of residential solar energy systems with an approximately 790 megawatts capacity that serve approximately 107,000 customers.
In April, NOVA completed its acquisition of SunStreet Energy Group, LLC, Lennar Corporation’s residential solar platform, and became its exclusive provider of residential solar and storage service. In addition, as part of the transaction, Lennar committed to provide tax equity investments to support Sunnova’s home-builder customer pipeline. The agreement should help NOVA propel its customer growth while scaling its business.
Although NOVA’s revenue grew 38.4% year-over-year to $41.28 million in the first quarter, ended March 31, 2021, it reported a $24.06 million net loss. Also, it generated a $23.31 million operating loss, representing a 63% year-over-year increase. Its EBITDA came in at negative $3.62 million over the same period.
NOVA could not beat consensus EPS estimates in any of the trailing four quarters. The stock has declined 24.5% over the past three months.
NOVA’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, which translates to Strong Sell in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
NOVA is also rated an F in Value and Quality. Within the F-rated Solar industry, it is ranked #20 of 20 stocks.
To see additional POWR Ratings for Growth, Momentum, Stability, and Sentiment for NOVA, Click here.
ReneSola Ltd. (SOL)
SOL is a leading international manufacturer and supplier of solar power products. The company operates through three segments: Solar Power Project Development, EPC Services, and Electricity Generation Revenue. It operated approximately 100 solar power projects with 173 megawatts in aggregate capacity as of December 31, 2020.
In April, SOL closed the sale of an approximately 10 MW portfolio of solar development projects to Greenbacker Renewable Energy Company in Utah. The shift in the capital efficient strategy from COD (post-construction) to more NTP (pre-construction) should allow it to focus on growing its quality project pipeline, while maintaining healthy profit margins.
In the fiscal fourth quarter, ended December 31, 2020, SOL reported a 39% year-over-year decrease in non-GAAP net revenue to $16.97 million, while its segment operating income declined 86.4% year-over-year to $716,000 over the same period. The company’s non-GAAP gross margin declined 69% from the year-ago value to $2.62 million.
Analysts expected SOL’s EPS to decline 33.3% in the current year. Its revenue is expected to decline 11.4% to $23.2 million in the next quarter, ending June 2021. SOL’s stock has declined 63.4% over the past three months.
SOL’s poor prospects are also apparent in its POWR Ratings. The stock has an overall D rating, which equates to Sell in our proprietary rating system.
The stock also has an F grade for Stability, and a D grade for Value and Quality. Click here to see the additional POWR Ratings for SOL (Growth, Sentiment, and Momentum).
SOL is ranked #14 in the same industry.
SolarWindow Technologies, Inc. (WNDW)
Formerly known as New Energy Technologies, Inc., WNDW is a developer of proprietary, transparent electricity-generating coatings, called “LiquidElectricity”. The applications of LiquidElectricity coatings span across various industries, including architectural, automotive, agrivoltaic, aerospace, commercial transportation, and marine.
In March, WNDW set a record by more than doubling its prior certified performance and achieving the highest independently certified power conversion efficiency of previous organic photovoltaic devices fabricated at the U.S. Department of Energy’s National Renewable Energy Laboratory through a Cooperative Research and Development Agreement (CRADA). This should help the company lead the market in setting a new standard in o achieving power conversion efficiency.
WNDW’s trailing-12-month operating loss came in at $9.92 million. It generated a $9.83 million trailing-12-month net loss. Also, its trailing-12-month EBITDA came in at a negative $9.65 million. Over the past three months, WNDW’s stock has declined 41.8%.
WNDW’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, which equates to Sell in our POWR Ratings system. WNDW has an F grade for Value, and a D grade for Growth. Among the 20 stocks in the same industry, it is ranked #11.
We have also graded WNDW for Momentum, Stability, Sentiment, and Quality. Click here to see them.
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NOVA shares were trading at $31.97 per share on Tuesday afternoon, down $2.83 (-8.13%). Year-to-date, NOVA has declined -29.16%, versus a 10.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Samiksha Agarwal
Samiksha Agarwal has always had a keen interest in financial markets. This has led her to a career as a financial journalist. Through her extensive knowledge of fundamental analysis, her goal is to help investors identify untapped investment opportunities in the stock market. More...
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