The solar PV industry has taken a beating since the beginning of the year, when investors finally got the message that manufacturing capacity was outstripping demand. Reductions to government incentives in Germany and Italy were only partially replaced by incentives in the US and China, and China’s large, low-cost panel makers forced prices down by more than 40%.

For all the action in solar there are only five companies that play in the sector that also have market caps above $1 billion. These are Applied Materials, Inc. (NASDAQ: AMAT), First Solar, Inc. (NASDAQ: FSLR), MEMC Electronic Materials Inc. (NYSE: WFR), GT Advanced Technologies, Inc. (NASDAQ: GTAT), and SunPower Corp. (NASDAQ: SPWRA).

24/7 Wall St. has taken a closer look into our solar screens.  If a value stock by the screens was purely China, we eliminated it because of the accounting woes and concerns facing that entire class of companies.  We took a look at the share price versus its 52-week range and versus Thomson Reuters consensus analyst price targets, as well as price/book ratios, forward P/E ratios, and other considerations.

There are always caveats in value screens, but that is particularly the case in the world of solar investing.  It used to be that solar was just a leveraged move on major oil price directional changes.  That is now a different situation entirely.

Applied Materials, Inc. (NASDAQ: AMAT) makes the equipment that solar PV makers use to manufacture cells and panels. The demand for the company’s equipment has risen as Chinese solar makers expand. How long the expansion continues will dictate how Applied fares. Shares recently closed at $10.73 and its market cap is $14.1 billion. The stock’s 52-week trading range is $10.30-$16.71. The current value is trading at a price-to-book ratio of about 1.65 to 1. Its forward price earnings multiple is 10.73. The company currently pays a dividend yield of 2.98% to investors. Thomson Reuters has a consensus price target of $13.88, implying roughly 29% upside to the most recent price.

First Solar, Inc. (NASDAQ: FSLR) is the largest of the solar PV makers by market cap, roughly 10x larger than any of Chinese competitors and more than 6x larger than its nearest US rival. The company’s thin-film panels are the industry’s low cost leaders, but falling prices for crystalline solar panels are pressing in, and the gap is now about $0.35/watt in First Solar’s favor. Shares recently closed at $84.96 and its market cap is $7.3 billion. The stock’s 52-week trading range is $85.96-$175.45. The current value is trading at a price-to-book ratio of about 1.99 to 1. Its forward price earnings multiple is 14.47. The company currently pays no dividend to investors. Thomson Reuters has a consensus price target of $139.53, implying roughly 64% upside to the most recent price.

MEMC Electronic Materials Inc. (NYSE: WFR), like Applied, does not directly make solar PV panels. The company provides the silicon used by the crystalline solar PV cell makers. It faces competition from a push by Chinese silicon makers, especially in the Chinese market for silicon. Shares recently closed at $6.62 and its market cap is $1.53 billion. The stock’s 52-week trading range is $4.96-$15.04. The current value is trading at a price-to-book ratio of about 0.64 to 1. Its forward price earnings multiple is 6.25. The company currently pays no dividend to investors. Thomson Reuters has a consensus price target of $10.33, implying roughly 56% upside to the most recent price.

GT Advanced Technologies, Inc. (NASDAQ: GTAT) is another equipment maker and its stock soared earlier this year on orders from the expanding Chinese solar makers. Formerly known as GT Solar, shares have pulled back as big orders have stopped being announced daily. The company also makes specialized equipment for making LEDs, and this could carry it through a downturn in solar PV expansion. Shares recently closed at $10.93 and its market cap is $1.38 billion. The stock’s 52-week trading range is $6.65-$17.50. The current value is trading at a price-to-book ratio of about 5.28 to 1. Its forward price earnings multiple is 5.55. The company currently pays no dividend to investors. Thomson Reuters has a consensus price target of $17.04, implying roughly 56% upside to the most recent price.

SunPower Corp. (NASDAQ: SPWRA) got an enormous boost in late April when French oil giant Total SA (NYSE: TOT) paid $1.4 billion for a controlling stake in the company. Once the deal closed in July, the share price fell from around $23 back to its former level. SunPower’s technology may be superior to other crystalline solar PV , but it is a high-cost supplier and that is not the place to be this year. SunPower Shares recently closed at $11.82 and its market cap is $1.2 billion. The stock’s 52-week trading range is $11.45-$23.36. The current value is trading at a price-to-book ratio of about 0.79 to 1. Its forward price earnings multiple is 8.32. The company currently pays no dividend to investors. Thomson Reuters has a consensus price target of $16.27, implying roughly 38% upside to the most recent price.

Once a growth sector, solar PV has fallen from grace quickly as government subsidies have been reduced. Panel makers like First Solar and SunPower have been especially hard hit. The equipment and silicon suppliers have done better, due primarily to expansion among the Chinese solar makers. The high implied upside levels indicate either a value buy or a value trap. In the near term the latter is much more likely.

Of the stocks we’ve looked at here, only Applied Materials pays a dividend, and its implied upside, while fairly high, is at least realistic. GT Advanced Technologies’ fall has been a bit shallower than the others, and there could be some life left in the stock. GT’s return on investment is about double Applied’s, but absent more orders from Chinese solar makers, that won’t last.

Applied’s dividend wins the day if you dare to look for “value” in the solar sector. Sadly, solar is not even close to being its only game.

Paul Ausick

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