Why Trina Solar Could Outgrow Yingli Green Energy and Canadian Solar

Trina Solar will release its quarterly report on Tuesday, and investors who bought in during the worst days of late 2012 have seen their shares soar almost 700% in less than a year. But even though shareholders are increasingly enthusiastic about Trina's long-term prospects, its earnings still show how hard it needs to fight against rivals Yingli Green Energy and Canadian Solar in order to secure its place in the highly competitive Chinese solar industry.

China's solar industry caused immense problems for the global solar market in recent years, as production overcapacity led to gluts of modules on the market, hurting pricing power and causing margins to fall to unsustainable levels. Even though more favorable trends in the broader industry have raised optimism about potentially improving conditions for the broader market, Trina Solar still faces the challenges of getting profitable and keeping its debt under control. Let's take an early look at what's been happening with Trina Solar over the past quarter and what we're likely to see in its report.

Stats on Trina Solar

Analyst EPS Estimate


Year-Ago EPS


Revenue Estimate

$472.92 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

How Trina Solar earnings are shining brighter
There's no question that analysts have gotten a lot more optimistic in recent months about Trina earnings, slashing their third-quarter loss projections by more than half and now predicting that the company could become profitable as early as next year. The stock has responded with similar enthusiasm, climbing a whopping 132% just since mid-August.

Trina brought its considerable momentum into the current quarter, with its second-quarter revenue climbing 69% to help the solar company cut its net losses almost by half. In a welcome change, pricing power returned to Trina during the second quarter, with sales figures outpacing shipment growth and potentially supporting the return to profitability that shareholders have sought for a long time.

Trina still relies on China's domestic solar market to a somewhat troubling extent, with the company having projected more than a quarter of its sales coming from within China. The nation's recent moves to boost solar use have undoubtedly helped the company's shipment volume, but what other solar players have found is that much better margins are available in key overseas markets like Japan. Trina hopes that a new trade agreement will help boost margins from European sales, and if it can get a bigger presence in Japan, Trina could get much closer to profitability in the near future.

The key advantage that Trina has over Canadian Solar and Yingli Green Energy is that its debt levels are under better control. Canadian Solar's debt-to-equity ratio is almost double Trina's. Yingli Green Energy is in even worse shape, with more than $2 billion in net debt hanging over the company. Having a healthier balance sheet lets Trina have more flexibility in choosing future growth strategies.

In the Trina earnings report, watch to see if the solar company can continue cutting its losses and finding higher-potential markets to boost sales. If it can, then Trina could outpace Yingli and Canadian Solar in finding its way to profitability sooner rather than later.

Protect your solar stocks from darkness
As important as solar has become, record oil and natural gas production has also played a huge role in the energy industry. To help you find the right plays while historic amounts of capital expenditures are flooding into oil and gas players, The Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

Click here to add Trina Solar to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

The article Why Trina Solar Could Outgrow Yingli Green Energy and Canadian Solar originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story