Why LDK Is Poised to Pull Back

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, solar wafer maker LDK Solar has received the dreaded one-star ranking.

With that in mind, let's take a closer look at LDK, and see what CAPS investors are saying about the stock right now.

LDK facts

 

 

Headquarters (founded)

Xinyu City, China (2005)

Market Cap

$266.8 million

Industry

Semiconductors

Trailing-12-Month Revenue

$767.1 million

Management

Founder/CEO Xiaofeng Peng

President/CEO Xingxue Tong

Return on Capital (average, past 3 years)

(1.4%)

Cash/Debt

$174.1 million / $2.9 billion

Competitors

SunEdison

Yingli Green Energy


Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 12% of the 1,508 members who have rated LDK believe the stock will underperform the S&P 500 going forward.

Just yesterday, one of those bears, fellow Fool Simon Erickson (TMFInnovator), succinctly summed up the underperform case for our community:

Another failed solar company that is about to go belly up.

LDK got too aggressive in taking out debt right before the downtown (2007-2008). Their revenues have fallen by 70% since then and margins have turned sharply lower. Take note that last year, LDK's net loss more than 10% greater than its TOTAL revenue. That's bad news here, folks.

Subsidies are drying up, and costs per MW are still moving lower. I'm still bullish on concentrated solar as a potential low-cost, regional power source. But solar PV companies (LDK included) are really going to have it rough for the next few years.

TMFFlushDraw wrote a great piece about what it would take for solar companies to get back to profitability.

For LDK, 28% gross margins just aren't going to happen. It's only a matter of time until the lenders demand their money back and the music stops playing.

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The article Why LDK Is Poised to Pull Back originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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