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Quality of Earnings Analysis

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SolarWorld AG Q4 2009 Open as PDF Send to a friend
Category: (SolarWorld AG - XTRA: SWV)

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Wednesday, 28 April 2010

SolarWorld AG is a German-based company engaged in the solar energy industry. SolarWorld produces silicon wafers, solar modules and solar cells. SolarWorld faced significant challenges in 2009 as it experienced decreased financial performance. While the fourth quarter showed improvement, the company must continue that performance in order to solidify itself as one of the industry’s top companies.

The company ranks near the top in just three metrics: last 12-months (LTM) gross margin, revenue per employee and cash-to-debt. SolarWorld has seen most of its metrics plummet to the bottom half of its peer group. Poor inventory management is the main reason for the company’s low ranking in the cash conversion cycle. Capital expansion is partially the cause for a poor ranking in free cash flow-to-net income, aside from a poor LTM operating cash flow. A €400 million bond placement in January 2010 will not help to improve the company’s already low debt-to-equity ranking.

Most of the company’s qualitative rankings are average for the peer group. Quarterly reports are provided with full financial statements. The company could stand to provide more disclosure surrounding several of its practices, including its warranty accruals and allowance for doubtful accounts.

 


 

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