In some ways, buying a falling stock in front of earnings isn’t a smart thing to do. There is always the chance that there are people out there who know more than you do and that the drop is the result of that knowledge. Furthermore, it could be argued that when sentiment around a stock is extremely negative, even what looks like a generally good earnings report will be picked apart for weaknesses to justify more selling.
CSIQ’s drop hasn’t just been about upcoming earnings. It has also been a result of weakness in China, a key market for them. That part of it I understand in some ways, but it looks to have gone too far, especially considering that economic weakness in China is not the same in its scope and implications as weakness in the West. The Chinese government can target stimulus quite easily, and is…
That is why, even though the beginning of June looks like this, I intend to buy Canadian Solar in front of their calendar Q2 earnings release, which is scheduled for Tuesday, August 22CSIQ’s drop hasn’t just been about upcoming earnings. It has also been a result of weakness in China, a key market for them.
Does that make sense to you? A 30% drop on a 42% increase in profits? No, it doesn’t to me either. And on top of that, every value metric suggests that the stock is undervalued at these levels. Forward and trailing P/Es stand at 6.3 and 6.9, respectively, with a PEG ratio, where a value below 1.0 indicates value, of 0.25, and CSIQ is trading below book value and at only 0.29 times sales.