JinkoSolar Holding Company (JKS) and Renesola Ltd. (SOL) are two of the world’s prominent players in the solar energy space. Based in Shangrao, China, JKS primarily operates through two segments —manufacturing segment, and the solar power projects segment. SOL, headquartered in Stamford, Connecticut, mainly operates through three segments — Solar Power Project Development, EPC Services, and Electricity Generation Revenue.
Because climate change is an imperative in today’s world, governments worldwide are taking steps to achieve a renewable energy-based future. Solar energy, which is expected to be 5 times cheaper than fossil fuel electricity by 2040, is expected to lead the change. Against this backdrop, both JKS and SOL have been witnessing a significant rise in demand for their products.
While JKS has returned 208.4% over the past five years, SOL has gained 144.1%. In terms of past-year performance, SOL is a clear winner with 1380.9% returns versus JKS’ 194%. But which of these two stocks is a better pick now? Let us find out.
JKS announced this month that it had completed an offering of American depositary shares (ADS) and received $98.25 million in proceeds. The company also announced that all shareholder resolutions proposed at the company’s 2020 annual general meeting held on December 29, were passed.
On December 15, JKS announced a few changes to its senior management, which includes the appointment of Xiande Li as the CEO. He was previously the company’s an. JKS announced in December that the “Weekly Toyo Keizai” had listed JKS in its latest ranking of “China’s Top 100 New Enterprises.” SOL is also the only photovoltaic (PV) company given the highest AAA rating for credit quality in the Chinese market.
JKS also announced this month that it has entered into an agreement to sell a portfolio of projects located in Hungary to Obton. The portfolio comprises 20 solar plants in five locations and has a combined capacity of 12.3 MW.
On January 5 SOL signed a Memorandum of Understanding (MOU) with Eiffel Investment Group to establish a joint venture that will provide financing for the company’s current and future solar projects across Europe. And on December 23, SOL announced that it has entered into an agreement to sell two ground-mounted solar parks in Romania with a combined capacity of 15.4 MW to Alternus Energy Group plc.
SOL was awarded 38 solar utility projects in Poland’s electricity auction held on December 3, with capacity of 1 MW for each. All these projects are under Poland’s Contract for Difference (CFD) regime and eligible for a 15-year guaranteed tariff.
Recent Financial Results
JKS’ revenue surged 17.2% year-over-year to $1.3 billion for the third quarter ended September 30, 2020. Its non-GAAP net income increased 6.7% year-over-year to $47.3 million, yielding EPS of $1.06, which increased 5.7% year-over-year. Its quarterly shipments increased 53.8% year-over-year to $5,177 MW.
SOL’s revenue of $9.7 million for the third quarter ended September 30, 2020 was at the high end of its guidance range. The company reported its second consecutive quarter of profitability with non-GAAP net income of $2.5 million, yielding EPS of $0.04. As of November 30, 2020, SOL’s project pipeline had 732 MW late-stage projects, with 300 late-stage projects in the United States itself, and 150 in the United Kingdom, among others.
Expected Financial Performance
Analysts expect JKS’ revenue to increase 6.4% for the quarter ending March 31, 2021, and 18.3% in 2021. The company’s EPS is expected to grow 9.9% in 2021, and at a rate of 23.6% per annum over the next five years.
In comparison, the market expects SOL’s revenue to increase 18.1% for the quarter ending March 31, 2021, and 126.7% in 2021. The company’s EPS is expected to grow 3000% in 2021, and at a rate of 15% per annum over the next five years.
Thus, SOL has an edge over JKS here.
JKS’ trailing-12-month revenue of $5.19 billion is higher than SOL’s $83.63 million. However, SOL is more profitable with a gross margin of 26.1% versus JKS’ 18.2%.
Also, SOL’s leverage free cash flow margin of 39.1% compares favorably with JKS’ negative values.
In terms of forward P/E, SOL is currently trading at 1007x, much more expensive than JKS, which is currently trading at 20.17x. Moreover, SOL is more expensive both in terms of trailing-12-month P/S (11.62x versus 0.57x), and trailing-12-month EV/S (15.44x versus 1.22x).
In terms of trailing-12-month price to book, SOL’s 9.49x is much higher than JKS’ 2.06x.
Though SOL looks significantly more expensive than JKS, it is worth paying this premium considering SOL’s significantly higher earnings growth potential.
While SOL is rated “Strong Buy” in our proprietary POWR Ratings system, JKS is rated “Neutral.” Here are how the four components of overall POWR Rating are graded for JKS and SOL:
JKS has a “C” for Trade Grade, Buy & Hold Grade, and Industry Rank, and a “D” for Peer Grade. It is currently ranked #13 of 17 stocks in the Solar industry.
SOL holds an “A” for Trade Grade, and Peer Grade, a “B” for Buy & Hold Grade, and a “C” for Industry Rank. It is currently ranked #6 in the same industry.
Both SOL and JKS are good investment bets considering their market dominance and continued innovations. However, SOL appears to be a better buy despite trading at a significantly higher valuation based on its higher revenue and earnings growth potential.
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SOL shares were trading at $22.53 per share on Tuesday afternoon, up $2.39 (+11.87%). Year-to-date, SOL has gained 97.11%, versus a 1.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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