Is It Time To Consider Buying Canadian Solar Inc. (NASDAQ:CSIQ)?

While Canadian Solar Inc. (NASDAQ:CSIQ) might not have the largest market cap around , it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Canadian Solar’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Canadian Solar

What's The Opportunity In Canadian Solar?

Great news for investors – Canadian Solar is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 5.28x is currently well-below the industry average of 30.2x, meaning that it is trading at a cheaper price relative to its peers. However, given that Canadian Solar’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Canadian Solar?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 50% over the next couple of years, the future seems bright for Canadian Solar. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? Since CSIQ is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on CSIQ for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy CSIQ. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.

So while earnings quality is important, it's equally important to consider the risks facing Canadian Solar at this point in time. For example, Canadian Solar has 3 warning signs (and 2 which shouldn't be ignored) we think you should know about.

If you are no longer interested in Canadian Solar, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com