Top Solar Stocks for Q4 2021

The solar energy industry has grown rapidly even as fossil fuels remain the dominant source of global energy use. Solar industry companies come from multiple sectors, including utilities, industrial, and energy, and include popular stocks such as SolarEdge Technologies (SEDG) and SunRun Inc. (RUN). While some large utilities and energy companies have solar and renewable energy divisions, these businesses typically are not included in the industry’s listings because the parent’s primary focus is not solar.

Solar stocks, represented by the Invesco Solar ETF (TAN), have outperformed the broader market over the past year. TAN has provided a total return of 52.3% over the last 12 months, above the iShares Russell 1000 ETF’s (IWB) total return of 34.3%. These market performance numbers and all statistics in the tables below are as of Sept. 14, 2021.

Here are the top three solar stocks with the best value, the fastest growth, and the most momentum.

These are the solar stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.

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• ReneSola Ltd.: ReneSola is an international renewable energy company that builds and manages energy projects. The company primarily focuses on the development, construction management, and financing of solar power projects. ReneSola recently announced financial results for Q2 of its 2021 fiscal year (FY) ended June 30, 2021. Net income attributable to shareholders rose 125.2% year over year (YOY) despite net revenue declining 29.2% compared to the year-ago quarter. The company’s cost of revenue sank 61.4%, helping to boost net income.
• SunPower Corp.: SunPower is an integrated solar products, systems, and services company that sells primarily to residential and commercial customers worldwide. The company designs and manufactures solar panels and systems. SunPower announced in early August financial results for Q2 FY 2021 ended July 4, 2021. Net income rose 34.5% YOY on revenue growth of 41.9%. The company said that it was seeing increasing consumer demand for solar.
• Daqo New Energy Corp.: Daqo New Energy is a China-based solar energy company that manufactures polysilicon for sale to manufacturers of solar cells and modules.

These are the top solar stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of over 2,500% were excluded as outliers.

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• Daqo New Energy Corp.: See above for company description. The company’s EPS growth rate was not included in the table above because, at an astronomical rate of 9,980%, its growth rate exceeds Investopedia’s usual cutoff of 2,500%. Any growth rate beyond this amount is considered an outlier and likely due to one-time accounting adjustments or other issues that may not accurately reflect the performance of a company’s primary business. However, Daqo still ranks as the top growth stock even with the exclusion of its EPS growth rate.
• Enphase Energy Inc.: Enphase Energy is a global energy technology company that supplies microinverter-based, solar-plus-storage systems. It brings together solar generation, storage, and energy management on a single platform. The company announced in late July financial results for Q2 FY 2021 ended June 30, 2021. Enphase Energy posted net income of $39.4 million, a significant improvement from the net loss of $47.3 million reported in the year-ago quarter. Net revenue rose 151.8% YOY. The company said that demand for its microinverter systems outstripped supply due to supply chain constraints on components. Because the company’s EPS went from negative in the year-ago quarter to positive in the most recent quarter, an EPS growth rate could not be calculated for the table above.
• Sunrun Inc.: Sunrun is a home solar panel and battery company. It designs, develops, installs, and maintains residential solar energy systems throughout the U.S. Sunrun announced in early August that cofounder Lynn Jurich will transition from her current role as chief executive officer (CEO) to executive co-chair of the company’s board of directors. Mary Powell, a Sunrun director and former president and CEO of Green Mountain Power, was appointed to take over as CEO, effective Aug. 31, 2021. Sunrun reported negative EPS for the most recent quarter, which is why an EPS growth rate was not calculated for the table above.

These are the solar stocks that had the highest total return over the last 12 months.

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• GCL-Poly Energy Holdings Ltd.: GCL-Poly Energy is a Hong Kong-based solar photovoltaic company. It supplies photovoltaic materials, such as polysilicon and silicon wafers, and offers solar system solutions. The company also owns several large-scale solar farms globally.
• ReneSola Ltd.: See above for company description.
• Daqo New Energy Corp.: See above for company description.

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