Investors interested in Solar stocks are likely familiar with First Solar (FSLR) and Shoals Technologies Group (SHLS). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, First Solar is sporting a Zacks Rank of #2 (Buy), while Shoals Technologies Group has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that FSLR has an improving earnings outlook. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
FSLR currently has a forward P/E ratio of 12.75, while SHLS has a forward P/E of 24.88. We also note that FSLR has a PEG ratio of 0.50. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. SHLS currently has a PEG ratio of 1.04.
Another notable valuation metric for FSLR is its P/B ratio of 2.44. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, SHLS has a P/B of 2.77.
These are just a few of the metrics contributing to FSLR's Value grade of B and SHLS's Value grade of D.
FSLR has seen stronger estimate revision activity and sports more attractive valuation metrics than SHLS, so it seems like value investors will conclude that FSLR is the superior option right now.
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First Solar, Inc. (FSLR): Free Stock Analysis Report
Shoals Technologies Group, Inc. (SHLS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).