The Solar Manufactures
To meet Minnesota’s new legal requirements, solar manufactures are an integral part of the equation. Chinese manufactures like Yingli Green Energy Hold. Co Ltd. (ADR) (NYSE:YGE) have won the cost war and brought their panel prices down to $0.48 per watt in the fourth quarter of 2012. For homeowners who do not need to worry about real estate costs and warranties these cheap Chinese panels are a good fit. More sophisticated buyers look at the total system cost, real estate costs and warranties. These buyers are more inclined to look at panels with higher efficiencies like those produced by Sunpower Corporation (NASDAQ:SPWR).
Yingli Green Energy Hold. Co Ltd. (ADR) (NYSE:YGE) has a total debt to equity ratio of 6.55 and a profit margin of -28%. With these numbers it looks like the company could be setting itself to go into receivership. The quick ratio is a measure of the short term ability of a company to pay its bills. Yingli Green Energy Hold. Co Ltd. (ADR) (NYSE:YGE)’s quick ratio of 0.5 is significantly less than Sunpower Corporation (NASDAQ:SPWR)’s quick ratio of 1.0. The recent failure of the Chinese solar manufacture Suntech shows that Yingli Green Energy Hold. Co Ltd. (ADR) (NYSE:YGE)’s bankruptcy is a possibility.
Sunpower Corporation (NASDAQ:SPWR) is in a different situation as it has a total debt to equity ratio of 0.72 and is backed by the French oil giant Total. Right now Sunpower Corporation (NASDAQ:SPWR)’s margins are not healthy, but it is expected to earn $0.64 per share in 2013 and $0.86 in 2014.
The warranty is a very important part of a product. Sophisticated buyers are not inclined to purchase a product with a standard warranty from a company with a high probability of going bankrupt. It is very difficult to make a bankrupt company compensate you for product failures. For this reason, Yingli Green Energy Hold. Co Ltd. (ADR) (NYSE:YGE)’s cheap panels come with a deeper cost. Sunpower Corporation (NASDAQ:SPWR) guarantees its panels to 87% of its initial power for 25 years, while Yingli Green Energy Hold. Co Ltd. (ADR) (NYSE:YGE)’s Panda series are only guaranteed to 82%.
Conclusion
Xcel is one of the better investments. With a gross margin of 35.3% and history of green energy in Colorado, it has the necessary tools to meet this recent solar mandate. ALLETE Inc (NYSE:ALE) is a good second choice, but its interests outside its utility operations add in additional complexities.
Although a number of Chinese solar manufactures have effectively avoided U.S. tariffs by moving around production, Yingli Green Energy Hold. Co Ltd. (ADR) (NYSE:YGE)’s high debt load makes its products risky for investors and purchasers. Sunpower is a safer long term investment, but at its current price to book ratio of 2.53 it is rather expensive.
The article Look Out, Solar Is Moving North originally appeared on Fool.com.
Joshua Bondy has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Joshua is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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