Why SunEdison (SUNE) Is Soaring on Tuesday

Tickers in this article: SUNE

NEW YORK (TheStreet) -- Solar semiconductor company SunEdison  is soaring on Tuesday after announcing it had confidentially filed an S-1 to publicly issue shares of an anticipated solar project.

"The number of shares of common stock to be sold and the price range for the proposed offering has not yet been determined. The initial public offering is expected to commence after the SEC completes its review process, subject to market and other conditions," the company said in a statement.

In November last year, CFO Brian Wuebbels said the company planned to sell a 20% to 30% stake in a solar subsidiary through an initial public offering. The offering was predicted to raise around $300 million to be reinvested in new projects.

By early afternoon, shares had added 7.2% to $15.24, and trading volume of 13.8 million had exceeded its three-month daily average of 10.2 million. 

Also See: SunEdison to Close Polysilicon Manufacturing Plant Indefinitely

TheStreet Ratings team rates SUNEDISON INC as a Hold with a ratings score of C-. The team has this to say about their recommendation:

"We rate SUNEDISON INC (SUNE) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • SUNE's revenue growth has slightly outpaced the industry average of 5.5%. Since the same quarter one year prior, revenues slightly increased by 8.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, SUNE's share price has jumped by 200.20%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • SUNEDISON INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SUNEDISON INC continued to lose money by earning -$0.65 versus -$6.66 in the prior year. This year, the market expects an improvement in earnings (-$0.15 versus -$0.65).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 405.8% when compared to the same quarter one year ago, falling from $36.10 million to -$110.40 million.
  • The debt-to-equity ratio is very high at 6.40 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, SUNE maintains a poor quick ratio of 0.71, which illustrates the inability to avoid short-term cash problems.