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Investors looking for stocks in the Solar sector might want to consider either Canadian Solar (CSIQ) or Sunrun (RUN). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Canadian Solar is sporting a Zacks Rank of #2 (Buy), while Sunrun has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that CSIQ is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
CSIQ currently has a forward P/E ratio of 4.44, while RUN has a forward P/E of 70.48. We also note that CSIQ has a PEG ratio of 0.14. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. RUN currently has a PEG ratio of 7.52.
Another notable valuation metric for CSIQ is its P/B ratio of 0.67. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, RUN has a P/B of 0.91.
These are just a few of the metrics contributing to CSIQ's Value grade of A and RUN's Value grade of D.
CSIQ has seen stronger estimate revision activity and sports more attractive valuation metrics than RUN, so it seems like value investors will conclude that CSIQ is the superior option right now.
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Canadian Solar Inc. (CSIQ): Free Stock Analysis Report
Sunrun Inc. (RUN): Free Stock Analysis Report
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