Earnings Expert, LLC

Quality of Earnings Analysis

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LDK Solar 2010 Q4 Earnings Analysis Open as PDF Send to a friend
Category: (LDK Solar Co. Ltd. - LDK)

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Monday, 25 April 2011

The company recorded a fifth consecutive quarter of positive operating cash flow. Fourth quarter of 2010 revenue grew 36% to $920.9 million.  The company continued to operate with significant debt and a working capital deficit at the end of 2010. The company’s efforts to quell the doubts about continuing to operate indefinitely are unclear. The company formulated a plan to relieve its liquidity problem, but at the end of the 2010, the working capital deficit had worsened again.  The company previously indicated the problem would be resolved by April 2011 by the latest. While the company has made some progress based on transactions disclosed after the fourth quarter of 2010 earnings release significant work still remains for the company. We believe the consistent high short interest relative to its peers illustrates the skepticism surrounding the company’s share price.

The company improved its rankings on four metrics and declined in three metrics. Operating cash flow declined to 23rd from 4th and free cash flow improved to 18th from 23rd. The three year revenue compound annual growth rate (CAGR) improved to 8th from 22nd. Gross margin improved to 14th from 20th in the prior quarter. Heavy reliance on debt continues to leave the company at the bottom for debt-to-equity. The company expects to increase both selling, general and administrative expenses and research and development expenses in the near future. This would result in a better ranking for research and development, but a lower ranking for selling, general and administrative.

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