The Sun is up for the solar industry the world over, thanks to growing awareness about its benefits. This move toward solar has been spurred by pro-environmental regulations that strive to bring about a carbon-free economy.
Solar manufacturers are gaining from this global boom in installations and a turnaround in profitability following years of cost cutting to survive declining panel prices. Data from the U.S. show strong solar uptake in 2015. The U.S. installed more solar than natural gas capacity last year, its first in history. According to a current report by GTM Research, U.S. solar installations grew 17% in 2015 to 7,286 megawatts (MW), marking the 15th consecutive annual record. Per the Solar Energy Association, in the next two years, approximately 20,000 MWs of new solar capacity will be installed, about twice the existing capacity.
Given these bullish sentiments, investors may like to look for momentum in stocks seeking higher returns in a short spell of time. The strategy mainly seeks to earn profits by buying sizzling stocks that have been on an uptrend over the past few weeks or months.
Selecting momentum stocks has now become an easy task thanks to the Zacks Momentum Style Score which indicates the favorable time to enter a stock to take advantage of the momentum with the highest probability of success. Our research indicates that stocks with a Momentum Style Score of ‘A’ or ‘B’ along with a Zacks Rank #1 (Strong Buy) or 2 (Buy) suggest the best upside potential with a stronger momentum effect.
Considering these parameters, we prefer JinkoSolar Holding Co., Ltd. JKS, a holding company over its rival Canadian Solar Inc. CSIQ. JinkoSolar has a market cap of $687.9 million. JinkoSolar is a well-known provider of solutions in the photovoltaic industry in Jiangxi and Zhejiang provinces in China and recovers silicon materials, makes solar modules and generates solar power.
JinkoSolar’s net profit more than tripled in 2015 as revenues climbed 41%. This was mainly due to the company’s record-high solar module shipments, which reached nearly 3 gigawatt (GW) in 2015, comprising 520.4 megawatt (MW) used in its own downstream projects. For 2016, JinkoSolar is banking on yet another achievement: its shipments are expected to be in the range of 6 GW and 6.5 GW, an increase of between 33% and 44%.
Momentum Style Score: A
VGM: A
Zacks Rank: #2
P/E (F1): 4.48 versus industry average of 16.8
P/B: 0.7 versus industry average of 1.33
Kitchener, Canada-based Canadian Solar, a solar module producer, witnessed strong growth in total solar module shipments in the fourth quarter of 2015. The company reported record shipments of 1.43 GW for the quarter, 1.38 GW of which were recognized as fourth-quarter revenues. The company is gradually gaining share in Asia, which is predicted to be a major solar market in the near future, with Japan, India and China primarily driving demand. Asia and others contributed 41.1% to net revenue in the fourth quarter of 2015, up significantly from 29.2% in the year-ago quarter.
Momentum Style Score: F
VGM: A
Zacks Rank: #3 (Hold)
P/E (F1): 9.87 versus industry average of 16.8
P/B: 1.3 versus industry average of 1.33
Both stocks sport a VGM score of “A” where 'V' stands for Value, 'G' for Growth and 'M' for Momentum. However, keeping in mind the momentum sentiment of investors, JinkoSolar comes out to be a more convincing choice.
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