Solaredge Technologies Inc. (SEDG) Stock Analysis
- WinInStocks
- Feb 13, 2020
- 4 min read
Current price:
Price on date of analysis: $111.86
Market cap: $5.62B
Overall assessment: BUY
Overall assessment:
This stock is a buy for me. No matter it is currently a bit overpriced, I analyse stocks from a position of a long-term investor, ready to hold 2-3 years. While there is a risk that the stock will see some downs in 2020, I strongly believe the company will provide good return in 2-3 years. Only wish I bought it earlier when it was at $74 or better $50.
Why did SEDG pique my interest?
Last Year Sales Growth: 74%. Past 5 Years Sales Growth: 291%. This means sales growth accelerated in the last year.
Stock moved from under $20 to $106 in the past 3 years.
Trendy product – high tech, good industry.
SEDG Overview: company, category description
SolarEdge Technologies, Inc. engages in the operation of inverter solution for the harvesting and managing of photovoltaic solar power. The company's products include power optimizer, inverter and monitoring portal. It offers residential solutions, commercial solutions, and grid services. The company was founded by Guy Sella, Lior Handelsman, Yoav Galin, Meir Adest and Amir Fishelov in 2006 and is headquartered in Hod HaSharon, Israel.
The stock price chart is probably the most beautiful ‘by-the-rules’ chart I have seen. A nice, long-term cup-and-handle formation that built from 2016 to 2019 got a bullish break-out in July 2019. The stock is now moving up in an uncharted territory, meaning it go up quite a lot.
SEDG Financial overview
SolarEdge Technologies (SEDG) grew sales 291% in the past 5 years, which is not that much. However, in the past year, sales growth accelerated as the company grew sales by 74%. With that, the stock is on fire growing from $14 in 2017 to $110 in the past week.
The company has big plans on targeting new markets and diversifying its portfolio that will give it room for sustainable growth for next few years. Below is the strategy for the company they presented in November 2019. Full presentation can be found here: https://investors.solaredge.com/static-files/38d862f4-3ffd-401e-b6f5-cff8f5cdbbc9
I particularly like this one. Talks about how they are primarily in Residential today and how they want to go after stronger market position and revenue from commercial and utility spheres.
SEDG Key financial ratings/Stock Value
SEDG saw a bit of a decline in EPS at the beginning of 2019, likely due to seasonality effect. However, since then it was growing sales and profit very well.
The price movement is a bit ahead of PE ratio: in the past PE was hovering around 20 line. Right now, it reached PE of above 50 (52 to be exact). This may be a negative sign that the stock is slightly overpriced. However, we obviously must take predicted growth into consideration.
Below is the breakdown of the anticipated EPS growth for the next 4 years. Average growth that analysts predict (not counting 2019) is 24%.
2018 – 2.69
2019 (est.) – $2.91 (+8%)
2020 – 4.17 (+43%)
2021 - 4.54 (+9%)
2022 – 5.82 (+28%)
2023 – 6.81 (+17%)
Based on these assumptions the PEG (price-to-earnings-to-growth) is 52 (PE)/24% = 2.17. Usually we look for PEG score as low as possible with a score of 1 being the target. Scores under 1 mean the value of the stock is very good (the stock is undervalued).
If we use next year’s earnings (2020) and apply today’s stock price we get a PE of $106/4.17 = 25.4. If we assume the company will continue to grow EPS at 20% after 2020, our PEG score is 1.27. This is much better, but all this means is that the stock may be a long-term hold as the stock may hold for a bit to cool off.
SEDG Ratings by analysts
There are 11 analysts covering SEDG stock with a mean rating of 4.3. The target price does not catch up with the recent stock price growth as the target average price target currently being below the stock price. In any case, with the current P/S and PEG scores the stock is clearly undervalued.
Who owns it? Changes in ownership
Most of company’s float is held by institutions. Over the past quarter there was a sharp increase in positions held by institutions both in terms of past owners increasing their positions and the addition of new positions.
SEDG Buzz (StockTwits)
Currently there is not too much conversation volume for the stock despite recent growth in stock price. However, the sentiment is largely positive.
SEDG Risks
The main risk is an emergence of new technology that is better than SolarEdge’s. If it lands in the hand of a giant company like Apple, Google, Amazon, Tesla, etc., they will quickly build infrastructure and using their marketing dollars can storm the market and take the lead. The worst thing is that these giants don’t even have to invent anything, if they see something good, they will just buy it.
The other risk (as I noted above) is that the company reached new highs of PE above 50. Its PEG is above 2. The stock price did grow quite quickly gaining 50% just in the past 4-5 months (from $74 to $112). Some of the institutions owning the stock may be more than happy with this return and sell in the next quarter, sending the stock price lower.
On the other hand, in the past year, sales growth sped up, which may be the key reason why the company is now trading at a higher PE.
SEDG - Overall assessment and summary
This stock is a buy for me. No matter it is currently a bit overpriced, I analyse stocks from a position of a long-term investor, ready to hold 2-3 years. While there is a risk that the stock will see some downs in 2020, I strongly believe the company will provide good return in 2-3 years. Only wish I bought it earlier when it was at $74 or better $50.
My rating: BUY
Have an idea about Solaredge Technologies Inc. (SEDG)? You have a different opinion about this stock? I made an error in assumptions? You have additional information to share? Please leave your comments below.
Comments