A Look at SunPower (SPWR) Valuation After Strong Q3 Results and Major Strategic Expansion

SunPower (SPWR) just reported its Q3 results, beating expectations on both revenue and operating income. The company is also making moves by acquiring Sunder Energy and doubling its dealer salesforce.

See our latest analysis for SunPower.

SunPower’s shares have seen some recovery lately, with a 30-day share price return of nearly 7% and a 9% bump over the last 90 days. This follows upbeat earnings and notable moves such as changing its name and doubling its distribution network. Still, momentum is rebuilding from a tough stretch, as the 1-year total shareholder return is down more than 20% and the 3-year total return is off by over 80%.

If this turnaround story has your attention, now could be the perfect time to broaden your search and discover fast growing stocks with high insider ownership

With shares recovering and SunPower forecasting record results after its strategic expansion, the big question now is whether the current stock price still offers room for upside or if the market has already priced in these growth prospects.

Price-to-Sales of 0.6x: Is it justified?

At a price-to-sales ratio of 0.6x, SunPower is trading well below both its industry and peer averages, despite its last close price of $1.89. This suggests the market sees less value in SunPower’s sales compared to competitors, or it is significantly underpricing expected growth and profitability.

The price-to-sales ratio compares a company’s stock price to its revenues. This offers investors a useful way to value companies that are not currently profitable, especially in growth industries like solar energy. For SunPower, this low multiple might mean skepticism about future margins, but it can also indicate a market opportunity if the business turns around.

SunPower’s 0.6x price-to-sales is notably lower than the US Electrical industry average of 2.5x, and even further below the peer average of 11.5x. When looking at the estimated fair price-to-sales ratio of 2.4x, the gap remains substantial. This hints that the market could eventually readjust closer to this level if the company delivers on growth expectations.

Explore the SWS fair ratio for SunPower

Result: Price-to-Sales of 0.6x (UNDERVALUED)

However, weak long-term returns and ongoing net losses remain potential setbacks that could dampen optimism around SunPower’s turnaround story.

Find out about the key risks to this SunPower narrative.

Build Your Own SunPower Narrative

If you have a different take on SunPower’s outlook or want to dig into the numbers yourself, you can build your own narrative in just a few minutes, your way. Do it your way

A great starting point for your SunPower research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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