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Which renewable energy company is a more lucrative investment? With Plug Power (PLUG) and Canadian Solar (CSIQ) taking different approaches to renewable energy, which company is poised for growth in the future?
This is Sailesh Tirupasur. I'm a part of Stock Card's summer internship program in 2020, and this post is a part of my Stock Battle series. I don't own these two stocks, and my goal here is to study them to decide whether to invest or not.
These stocks are apart of our Companies Shaping the Future stock list. If you want to see other stocks in this category, click here.
Research and analysis:
Plug Power (PLUG) and Canadian Solar (CSIQ) are two leaders in the renewable energy industry. The two companies have a history of being at the forefront of the extremely popular niche and are pioneering developments in fuel cell and solar panel technology.
Plug Power's analysis:
Plug Power is an innovator of modern hydrogen and fuel cell technology. According to the company's quarterly earnings release, "it has revolutionized the material handling industry with its full-service GenKey solution, which is designed to increase productivity, lower operating costs, and reduce carbon footprints reliably and cost-effectively." Based on Scott Levine's analysis, shares of Plug Power are up 180% year-to-date due to investors growing more confident that the company is on track to meet management's 2024 projection of generating sales of $1.2 billion and an operating income of $170 million. Plug Power has also strengthened its business profile by acquiring two companies in June that will aid in the business of hydrogen generation. While the company has a track record of growing its top line, many experts are wary of its future. The company's history of diluting shares also has investors skeptical about the future of the company.
Canadian Solar's analysis:
Canadian Solar is an integrated provider of solar power products, services, and system solutions. While many solar panel companies have gone bankrupt, Canadian Solar has thrived over the past decade, and investors are quite confident in its future. The solar panel expert set a goal of solar module shipments this year and expects to increase its growth rate by over 15% by the end of this year. Canadian Solar also has a strong focus on the energy storage market with a massive 2,820 megawatt-hours of storage projects. According to the company's Stock Card, the company's profitability seems quite positive last year, with an EPS growth trend of 10%. Its last quarter's profit margin is also at around 27%, which is over 10% higher than industry benchmarks. One prevalent risk that financial analysts like Scott Levine discuss is that solar panel businesses tend to sacrifice pricing power for market share.
Although the fuel cell market is expected to grow by around 13%, Plug Power's financials seem to be weak compared to Canadian Solar's. Canadian Solar has a long history of profitability and growth as well as the market for solar panels being expected to grow substantially.