Source: chuyuss / Shutterstock.com
Solar stocks could conceivably be the hottest stocks to trade right now, not because it’s summer. It is mainly because the temperature is high and solar companies could provide a long-term solution to energy efficiency, clean energy and lower energy costs, which lowers the inflation which remains at very high historical levels.
These solar stocks for sale should come as no surprise as there are credible arguments to support this move.
Let’s see why to sell these solar stocks or avoid them if you are considering buying them.
|MAXN||Maxeon Solar Technologies||$11.52|
sunrun (NASDAQ:CLASSES) has lost almost 23% of its value in 2022 and its losses could soon get worse. The company recorded sales growth of 74.58% in 2021 which was not enough to make a profit, but instead generated a net loss of $79.42 million.
In the first quarter of 2022the company had mixed financial results with a GAAP EPS of -$0.42, a shortfall of -$0.27 and revenue of $495.78 million per beat of $94.18 million .
The main argument for selling RUN stock is its free cash flow trend. The company has been steadily burning cash over the past five years, which is bad news for the valuation. There is also a debt problem because The debt ratio is 1.2 and the debt/EBITDA ratio is -45.6.
Price to Sales Ratio (TTM) of 2.94 also can’t stand cheap stock.
A company to repay its debt must generate cash, not burn it. Sunrun has a very significant cash burn problem. The above factors should scare you away from RUN stock now.
Sun Power (SPWR)
Sun Power (NASDAQ:SPWR) has good financial strength with a debt ratio of 1.59 and an Altman Z-Score of 0.5, indicating that the company is in financial difficulty.
The debt/EBITDA ratio of 12.07 is too high and in an environment of rising interest rates, having too much debt is a very bad business and financial decision.
When a business has positive sales growth like in 2021 with a increase of 17.66% and it produces a a net loss rather than expected profits, then there is a problem in his business. This is demonstrated by the cash consumption problem like Sunrun.
The stock is not cheap as it trades at a price-to-sales ratio (TTM) of 1.96 and a Price/Book (TTM) ratio of 7.86.
Maxeon Solar Technologies (MAXN)
Maxeon Solar Technologies (NASDAQ:MAXN) is a classic textbook stock to avoid. The company has experienced negative sales growth for the past two consecutive years-29.50% in 2020 and -7.29% in 2021 respectively.
The company is losing money and its net losses have expanded in 2021 to -$254.52 million of -$142.63 million in 2020. There is also enough debt as the debt ratio is 1.02.
The Altman Z-Score of 0.22 signals there is financial distress and this is confirmed by the negative free cash flow trend.
The following financial ratios should never be used in isolation, but they are more than enough to show how low the profitability of the company is. The gross margin is -5.12%, the operating margin is -21.37% and the net margin is -32.68%.
Having net losses and burning cash is one of the worst financial performances a company can have. Avoid it because it’s just a convincing sell.
As of the date of publication, Stavros Georgiadis, CFA had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.