ReneSola, LTD (SOL) has raised its earnings by almost four fold since last year. They continue to increase production and revenue guidance as they have recently entered into several long-term contracts. The company is attractively priced with a PEG ratio of .4, well under the industry average of 2.1.

Company Description

ReneSola, Ltd. manufactures solar wafers from raw silicon for photovoltaic cell makers like Suntech Power and JA Solar. The company is headquartered in Jiashan, China where it was founded in 2003. ReneSola carries a market cap of $1.9 billion and has approximately 3,100 full-time employees.

Net Income and Revenue Almost Quadruple

On August 19th, ReneSola announced spectacular second-quarter results. Net income rose 295% to $23.3 million, from $5.9 million in the same quarter last year. The company earned 38 cents per share, easily surpassing the consensus estimate of 31 cents. This was the second consecutive surprise with an average surprise of 19.6%.

Second-quarter revenue was $173 million, a 289% year-over-year increase. RenaSola also saw a jump in gross margin, now 24.7% up from 22.1% last quarter. The increase is mainly attributed to change in accounting, but reduced silicon usage per watt and lower costs also helped. Without the accounting change the margin would be 22.4%.

Plenty Of New Business

ReneSola signed five new long-term contracts in the past couple months. Suntech Power Co. increased the initial four-year 510MW order of silicon wafers for an additional four and a half years and another 1 GW of wafers.

The remaining four contracts range from three to six years and call for a total of approximately 750 MW of wafers to be delivered.

Raising Production and Revenue Outlook

The company has increased its full-year 2008 output to between 340 MW and 350 MW, up from between 330 MW and 340 MW. The increase should produce revenues of between $640 million and $670 million, up approximately $70 million from the previous target.

The Chart

Shares of SOL broke out of a bearish trend toward the end of July and are developing a nice level of support near $13 per share.

Content Courtesy: Zacks Investment Research

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