Wednesday, May 25, 2011

A lot of Value left in LDK Solar (LDK)

f you're looking for a bargain stock, check out LDK Solar (NYSE:LDK).

Over the past 12 months LDK Solar Co Ltd (LDK) shares have traded between $4.97 and its 52-week high of $15.1. LDK Solar shares are now trading with a P/E Ratio of 3.2 and EPS of 2.14.

The reason why shares have tanked is because the company has some debt issues. LDK has been planning to spin-off its operations that produce polysilicon, the key material used to make most solar modules, in an effort to cuts its debt of about $1.8 billion.

"With LDK likely in need of additional cash in 2011 and a poly plant spinout looking harder as pricing falls, we expect shares to remain under pressure," Wachovia analyst Sam Dubinsky said in a note to investors.

LDK said it still expects first-quarter revenue of $745 million to $755 million and gross margins of 30 to 31 percent.

MASTERY Bottom Line:

LDK is looking extremely undervalued at these levels, however the company is a little on the risky side with their debt ratio. In the past 30 days LDK stock's price has dropped 38%.

Still, this isn't another fly-by-night China company, they are legit. Jim Cramer was asked about LDK Solar during the lightning round last Thursday (May 19th). Cramer recommended against holding it, citing financial issues. Simply put, iand when LDK overcomes its significant working capital deficit, the company can be judged on its future prospects as a player in solar energy.

We think once they move forward with their debt offering and get some liquidity going again, shares will be off to the races. The stock can keep going lower, thus wait until a new 52-week low before taking any positions.

No comments:

Post a Comment