JA Solar Holdings Co. Ltd.'s (JASO) significant upswing following its February 2007 IPO remains a compelling growth story in clean energy. The growth potential for the solar industry as a whole is very promising. Capacity expansions and committed supply of key raw materials at JA Solar will continue to fuel growth.
Strong earnings growth coupled with a well-diversified customer base make JASO one of the fastest growing alternative energy stocks. Material cost savings through the company's long-term supply agreement will also boost margins. As of the date of this report, JASO trades at a multiple of 26.9x our current-year 2008 earnings per share estimate, or roughly in-line with the median value of its alternative energy industry.
The current multiple is at a significant discount to the average industry multiple and many of its peers. With strong projected year-over-year earnings projections throughout 2009, this discount represents an opportunity for the share price to appreciate significantly with forward P/E multiple expansions.
Meanwhile, JASO trades at a premium to the mean and median industry multiples of sales, cash flow and book value. Looking ahead, successful execution in the high-growth potential solar panel market warrants premium multiples to the broader market and JASO is well positioned to take advantage of this opportunity.
JA Solar is one of the most cost-efficient producers with a well-diversified customer base as well as silicon wafer supply agreements in place to cater to its production. Moreover, we note that despite the company's position in a strong growth industry, many other alternative energy stocks, excluding JASO, significantly underperformed the broader market over extended periods in 2006-07.
Accordingly, with a positive outlook in a high-growth bullish market opportunity in the alternative energy industry, we maintain our recommendation on JASO common stock to Buy with a six-month target price of $28.50. Price appreciation to our near-term valuation target represents 23.1% upside potential.
Read the full analyst report on JASO.
Get real-time market insights and profitable stock recommendations from the team of analysts at Zacks Equity Research. See all todays Analyst Blog entries on Zacks.com.