Trina Solar (TSL) – Outlook

As of December 31, 2007, Trina’s total R&D employee count stands at 41 with nearly all of them engaged in optimizing their existing solar module production value chain. That number translates to slightly more than 1% of their total employee count of 3487, which is exceptionally low. Trina needs to look into alternative technologies that have higher barriers to entry for competition – Specifically, investments in thin-film and other second and third generation solar technologies should payoff in the long run.

Trina’s investor relations and its relationship with Wall Street in particular need improvement. Specifically, there is a real lack of response from their investor relations department. Further, from listening to the Q1 2008 conference call, it is evident that Trina Solar needs to improve their effort to ensure these calls are conducted in a professional manner. This problem is not isolated entirely to Trina – LDK fared worse in their conference calls as discussed in one of our previous articles. Ultimately, as a US listed company, Trina needs to shore up their investor relations in the US to guarantee that their shareholders are treated right.

Below is a table that looks at Trina’s financials:

Year	2007 (as reported)	2008 (Projected)	2009 (Projected)
Revenue	$301.82M	783.79M	1.24B
Earnings Per Share	1.51	3.14	4.18
Year Over Year (YOY) PE growth rate	68	108	33
Net Margin	11.7	NA	NA

Trina is trading at just 1.3 times 2008-projected revenue and 10 times earnings. When considering the backdrop of 100% growth, the valuation looks very attractive. Further, it is at the rear end among valuations for Chinese solar manufacturers. Heading the spectrum is Suntech power (STP), which is valued at 3 times revenue and 20 times earnings. Such discrepancies are primarily due to market inefficiencies and over time should get corrected. Suntech deserves a premium due to its superior financial strength and long-term supply contracts, but the underlying nature of the business is similar for both companies. The very low valuation along with outstanding growth projections make Trina a good fit in the small-cap growth portion of investment portfolios.

Trina Analysis:

1. Trina Solar (TSL) - Part 1 - Introduction.
2. Trina Solar (TSL) - Part 2 - Business Issues.
3. Trina Solar (TSL) - Part 3 - Outlook.

Related Posts:

1. Trina Solar (TSL) - Stock Analysis - 08/08.
2. LDK Solar (LDK) - Stock Analysis - 03/08.
3. Solar Manufacturer Comparison (STP, TSL, YGE, CSIQ) - 11/07.
4. Suntech Power Holdings (STP) - Stock Analysis - 09/07.