First Solar SWOT Analysis - Case Study Example

Analyst Report on First Solar: The review of the information on the company allows one to recommend a hold onto the company. The company stock price is at its low with an average 52-week run of 39.18 to 73.78. First Solar has limited debt applied to its business with good cash reserves that means that it can amply take on expansion projects that will come up and ensure they successfully move towards developing more innovative products for the market and continue dominance in the field of semiconductor development. The company though needs to invest the money held to give more value to investors. The growing retained earnings need to be reinvested in other projects to provide a high return on investment for the investors. Continuing to hold the sum would render it dormant reducing returns for investors since their money is not actively involved in bringing profits. The company was founded in the year 1990 named Solar Cells Inc by Harold McMaster. The company sold to True North Partners private investors in 1999 saw to it that the name changed to First Solar. The company spread to different locations inventing new products for the market hence its growth and eventual going public in the year 2006 becoming a company trading on NASDAQ. During the same year, many other solar companies listed on the stock market including the Canadian Solar, Yingli Green Energy among others all responding to the growing demand for the products associated with solar power. Through its continuous growth, the company became the first solar company to list on the S&P 500. Going public increased the capital that the company needed to run other projects and expansion leading to its growth to the current state. As one of the companies in the technology industry, the company focuses on the production of specialized semiconductors that it has actively produced with a technology bit that has aided the company reduce the costs of production and increasing the amount of sales that it registers on an annual basis. The company produces solar panels too among other semiconductors that have allowed it to register growing returns. The company deals with the production of comprehensive photovoltaic systems of solar power through the advanced technology that it has and the modules used in production. The company through its innovative approach to power improvement has provided power plant solutions in an attractive alternative to the markets hence growing its demand and improving its position on the market. It has also promoted the consumption of fossil fuels in the current electricity generation needs. in addition to these, the company produces ecofriendly products that protect the environment while enhancing it too. The company during the beginning of the year 2015 was upgraded by Northland Capital from a an underperform to a market perform that indicates to investors the possibility of returns from the company. The company has aligned a number of events through which it has encouraged their investors of a possibility of a better performance and returns to them. The company entered into a partnership with Sun Power as announced on Monday February 23, 2015. Through these partnerships, the company has strengthened its position against competitors and helped deal away one of the competitors Sun Power. The activities of the competitors in relation to acquiring new plants and improving their technology needs considering their positioning for a fierce competition raises the need for First Company to approach the market in a stronger manner. A look at Southern Company’s acquisition of fourth California solar project provides the company with more strength to compete with First Solar and hence the need for First Solar to consolidate its position on the market through strategic partnerships. The partnerships provide better positioning for First Solar and an easy approach to competition that will give it more advantage of the competition and hence improved performance. The partnership has led to the development of a yield company that the two partners First Solar and Sun Power will introduce through a Public Offering. These provide projects for the investment of the retained earnings that the company has I stock to get the money back into cash flow to improve the returns of the company and its sales. The company has had revenues stagnate for a while over the three years under consideration and any investors that may have started growing negative towards the company may consider holding it based on its strategic approach to improving its position and hence the value for investors. Form the close of last year 2014, the stock price compared with the current price indicates a 29.1% growth in the stock price that provides for the indication of an improvement. The table below indicates the level of growth that the company has registered. GROWTH OF FIRST SOLAR COMPANY INDICATOR 2012 2013 2014 Current Share Price 30.86 54.64 44.60 62.89 Sales 3368545 3308989 3391814 N/A Profits (96338) 353038 396918 N/A EPS (9.38) 13.6 7.90 3.91 P/E 6.70 4.6 7.96 16.08 On the consideration of the company’s results, one realizes that the company has their profits improving on an annual basis providing for an improving position on returns that the investors obtain from their shares. These explain the basic need for investors to hold the company. The following indicators consider the performance of the company in comparisons to other industry players. These reveal the advantages that the company has over the competition on the market. INDICATOR First Company Altera Corporations LSI Corporations Beta 3.81 0.77 1.94 52 Week range 39.18-73.78 30.47-45.38 0.07-11.15 Debt/Equity 23.2 0.45 N/A Profit margin 19.04% 23.16% N/A Return on Equity 0.08 0.14 N/A Dividend Yield N/A 1.70% 1.10% INDUSTRY INDICATORS Indicators First company Altera Corporations LSI Corporations SunPower Corporation Market Capitalization $6.1Billion $13.4Billion $6.3Billion $4.3Billion P/E 15.68 29.29 44.56 22.07 Net Profit margin 19.04% 23.16% N/A N/A Considering the above details, the company is having a good positioning on the market and the prices of the stock are positioning for better rise. The stock has a good net profit margin that provides it with an advantage comparing with the best company in the industry Altera Corporations. The company also indicates a growing P/E, which indicates the position on the market. The lower the P/E the better the company is for it indicates possibilities of growth. Looking at the 52-week range, the company First Solar has more chances of providing more yields based on the level of its price. The price hit a high of 73.78 during the past 52 weeks in which it is on a rise meaning it, could hit that price or go beyond hence providing better returns to the investors. SWOT ANALYSIS: Strengths: Having established a position on the market through which the company has reduced the costs of production of its products, the company has a better positioning on the market compared to the others hence giving it an advantage. The company holds advanced technologies that provide it with the ability to produce technologically suitable products to the market. The company is in position to produce better products on the market compared to other companies hence improving its position on the market and ability to generate better returns. Weaknesses: The poor investment strategies have affected the company’s ability to generate returns from the idle money held as retained earnings. In order to generate more returns, the company needs to actively invest the retained earnings into profitable ventures to position the investors for better returns and hence a source of motivation. Opportunities: Considering the growing demand for solar products, the market for the company still proves fertile. The graph below indicates the growth in the demand for the solar products. Obtained from http://i0.wp.com/solarlove.org/wp-content/uploads/2013/07/US-PV-Markets-and-global-Market-Share1.png The graph above indicates the global market share for solar products that indicates to be on an increase that provides for an opportunity for First Solar to position itself more and perform better (Zach). These also build confidence in investors indicating to them the availability of the market for products of the company. Strategic partnerships with other companies such as Sun Power provide the company with a better position in the market that will yield better performance. The huge sums of retained earnings provide ready finance for the company to invest in many other projects with less debt and hence less leverage and interest costs on profits the company earns. The company has strong revenue reserves that provide it with the necessary financial needs to implement new projects hence improving the position it has on the market. These will profit it and improve the confidence in investors. Threats: One of the major threats that the company faces is competition, which is providing more challenges to the ability of First Solar to obtain better returns. The more competition there is on the market and the innovative abilities of the competitors the easily the company’s innovations become obsolescence and hence affecting its position and returns. The high number of employees that the company has and their growing state pose a threat the company with regard to growing operational costs. These will affect the level of profitability of the business and hence need watching over. Work cited: http://finance.yahoo.com/q/bs?s=FSLR+Balance+Sheet&annual Zach, Solar Power Growth & Solar Power Advantage (Charts). Viewed on April 17, 2015 from http://solarlove.org/advantages-of-solar-power-massive-solar-power-growth-check-out-these-charts/ Read More