SolarEdge Technologies (SEDG) is a great growth story. But the title is currently consolidating in a range of 150 points. Only buy this if you can handle strong price fluctuations.
SolarEdge is present solar activity:
SolarEdge Technologies, Inc., together with its subsidiaries, designs, develops and sells direct current (DC) optimized inverter systems for solar photovoltaic (PV) installations worldwide. It offers inverters, power optimizers, communication devices and smart energy management solutions used in residential, commercial and small-scale solar installations; and a cloud-based monitoring platform that collects and processes information from power optimizers and inverters, as well as monitors and manages the solar PV system. The Company also provides residential, commercial and utility-scale photovoltaic, energy storage and backup, electric vehicle charging and home energy management solutions, as well as grid services; and e-Mobility, automation machinery, lithium-ion cells and batteries, and uninterrupted power supply solutions, as well as virtual power plants, which help manage grid load and grid stability. In addition, it offers pre-sales support, continuous trainings, technical support and after installation services.
It’s the second largest company in this sector, with a market capitalization of $15.94 billion.
The solar industry is experiencing tremendous growth.
The total number of solar installations is increasing at an incredibly rapid rate. Most important is the adoption by utilities of this technology.
The cost of solar (above in yellow) continues to fall.
Solar is increasingly the choice for new generation capacity (above in yellow).
As a result, SolarEdge is growing at a steady pace:
Total revenue has increased in each of the past 10 years.
The business is profitable. Gross profit is between 32% and 34% of gross revenue. Operating profit came in at over 10% of gross income while net income is just under 10% of gross income.
Since SolarEdge is a growing company, it regularly spends more on investments than it generates sales. This is why the company has recorded a negative amount of cash in its cash flow statement for 8 of the last 11 years (top panel, bottom row). This means that the company had to rely on financing to generate cash.
Between 2013 and 2015, the company relied on short-term debt. He used small amounts of funding between 2016 and 2019, but had a big bond issue in 2020 that filled the company’s coffers.
The debt to asset ratio is very manageable right now.
It’s a classic growth story. The company is a leader in a growing field. As a result, its sales increase sharply. The company’s finances are a bit messy. But as long as it can continue to grow, it should be able to secure financing to fill cash shortfalls.
Now on to the graphics:
The chart on the left (about 2½ years, weekly bars) shows a strong rally, pullback, rally, then consolidation. Prices have been trading sideways between the lower 200s and mid-350s for about a year. The chart on the right shows the consolidation in more detail.
What we have here is a great growth story combined with a volatile stock chart. Yes, it is consolidating. But he does it within a range of 150 points. The ideal would be to wait for the action to reach the 200 mark again, then to buy. If you must have it now, do it. But understand – you are buying a ton of volatility. Only do this if you can handle a roller coaster of price movements.