Earnings Expert, LLC

Suntech trades at 7.4 times 2012 forward earnings, 54% below the industry average. Earnings quality is diminished by significant mark-to-market non-cash gains recorded in the fourth quarter of 2010.  The completed projects marked-to-market are not connected to the grid, approved for feed-in-tariffs or sold. Performance at the gross margin level and capacity growth for the last four quarters has not helped investor confidence. Significant impairments have impacted last-12 months earnings per share. Impairment charges of $180 million were recorded in the second quarter of 2010. High debt-to-equity ratio, with significant short-term debt and related party activities should be considered when reviewing Suntech’s valuation. The short interest is less than the industry average implying the share discount to peers may be in the right range.

The company is in the middle of its peer group on a majority of the rankings.  The company’s rankings declined on seven rankings and improved on two rankings. Operating cash flow-to- net income dropped to 15^th from 4^th and free cash flow-to-net income dropped to 17^th from 4^th due to $322.9 million of mark-to-market and equity earnings non-cash items offset by second quarter impairments impact on net income. Debt-to-equity declined to 32^nd form 25^th and cash-to-debt declined to 21^st from 19^th as peers improved ranking in these categories faster than the company. The company’s aggressive capital expansion has contributed to the high debt-to-equity. Research and development costs have decreased compared to peers decreasing the company’s ranking. Selling, general and administrative expenses dropped improving the company’s ranking to 17^th from 23^rd.