June 12, 2008 – Evergreen Solar (Nasdaq:ESLR) is presenting this morning at Thomas Weisel’s Alternative Energy Conference and we decided to take a look at the stock to determine whether it is timely or not. The stock closed yesterday at $9.15, putting it at a P/S (ttm) of 14.12, which is pretty rich. For example, LDK (NYSE:LDK) is holding a 5.78x P/S (ttm), Sunpower (Nasdaq:SPWR) is at 6.87x P/S (ttm), Yingli Green Energy (NYSE:YGE) is at 2.98x P/S (ttm) and Suntech is at 3.82x P/S (ttm). The leader in the midstream solar market in terms of market cap is First Solar (Nasdaq:FSLR) with a whopping 31.85x P/S (ttm). Granted, the P/S (ttm) metric is backward looking and perhaps Evergreen is getting a premium relative to future expectations.
The stock rallied recently to the $12 level when the company announced close to $1 billion in contracts through 2013. This is a big jump from the $78-$79 million posted over the past 12 months which is the number supporting the 14x multiple. The company has intimated that deliveries for the contracts will start this year, so if we factor a contribution of 5% of the recently announced contracts into our forecasts for 2008, then our P/S (2008) multiple comes in at 7.62x, and we come up with a price target at $16.94, a premium of 85% from current levels. The current market cap is only about 1.11x the contracts that ESLR just announced.
We think the stock should move higher from here and would be accumulating at the current $9.38 level.
Disclosure Note: SCPEditor has no position in ESLR.