SUNW Stock has a Bright Future in Solar and is Undervalued

Today we are looking at Sunworks, Inc. (NASDAQ: SUNW), to determine if the SUNW stock is a good buy. We will look at SUNW financial ratios, analyst ratings, and valuation to determine a SUNW stock forecast and price. What does SUNW Do? Sunworks, Inc., through its subsidiaries, provides photovoltaic and battery-based power and storage systems for the agricultural, commercial, industrial, public works, and residential markets in the United States. It also designs, finances, integrates, installs, and manages systems ranging in size from 2 kilowatt for residential projects to multi megawatt systems for larger commercial and public works projects.  Laying out Information for a SUNW Stock Forecast Who are Sunworks, Inc.'s Competitors? In order to undergo a comparable analysis (to determine SUNW stocks value), we need to first outline who SUNW's competitors are. These competitors need to be publicly listed, have valid financial metrics/multiples, operate in a similar manner to SUNW, and have a market cap similar to SUNW (if possible). By keeping this in mind, I found the following list of companies to be some of SUNW stocks closest competitors: FSLR, CSIQ, RUN, and JKS Sunworks, Inc.'s Earnings are Confusing (in a good way?) SUNW Earnings (Yearly): SUNW Revenues: In FY 2021, SUNW experienced a yearly increase in revenues of $63.24M (or 166.81%) resulting in a total revenue figure of $101.15M. SUNW Cost of Revenues: In FY 2021, SUNW experienced a yearly increase in their cost of revenues of $23.86M (73.1%), resulting in a total revenue figure of $56.51M. Since the increase (of 73.1%), in SUNW's cost of revenue was lesser (by -93.71%) than the increase (of 166.81%) in SUNW's revenues, we should expect that SUNW experienced an increase in their FY gross profits. SUNW Gross Profit: In FY 2021, SUNW experienced a yearly increase in their gross profit of $39.38M (or 747.51%) resulting in a total gross profit of $44.65M. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between FY 2021 and FY 2020. SUNW EBITDA: In FY 2021, SUNW experienced a yearly decrease in their EBITDA of $5,224,000 (or -37.11%) resulting in a total EBITDA of $-19.3M. This decrease is quite unusual given that their gross profits grew by such a large amount. SUNW Net Income: In FY 2021, SUNW experienced a yearly decrease in their net income of $10,686,000 (or -67.04%) resulting in a total net income of $-26.63M. SUNW EPS: Despite SUNW's decrease in net income of $10,686,000, SUNW managed to increase their EPS (by $0.04) from $-1.03 in FY 2020 to $-0.99 in FY 2021 Overall, this is kind of an odd earnings. Firstly, they grew their revenues, and gross profits by very sizable amounts. However, it got worse from there as they experienced large decreases in their yearly EBITDA and net income figures. However, their earnings got saved at the end due to their EPS actually gaining $0.04 YOY. For more clarification on their earnings, we can look to their more recent performances. SUNW Earnings (Quarterly): SUNW Revenues: In Q1 2022, SUNW experienced a quarterly decrease in revenues of $-478k (or -1.51%) resulting in a total revenue figure of $31.2M. SUNW Cost of Revenues: In Q1 2022, SUNW experienced a quarterly increase in their cost of revenues of $493k (2.96%), resulting in a total revenue figure of $17.16M. Since the increase (of 2.96%), in SUNW's cost of revenue was greater (by 4.47%) than the decrease (of -1.51%) in SUNW's revenues, we should expect that SUNW experienced an decrease in their Q1 gross profits. SUNW Gross Profit: In Q1 2022, SUNW experienced a quarterly decrease in their gross profit of $-971k (or -6.47%) resulting in a total gross profit of $14.03M. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between Q1 and Q4. SUNW EBITDA: In Q1 2022, SUNW experienced a quarterly increase in their EBITDA of $2,665,000 (or 24.54%) resulting in a total EBITDA of $-8.2M. This increase (of 24.54%) is great to see, however, it once again is odd due to their gross profit decreasing by 6.5%. SUNW Net Income: In Q1 2022, SUNW experienced a quarterly increase in their net income of $5,278,000 (or 39.14%) resulting in a total net income of $-8.21M. SUNW EPS: As a result of SUNW's decrease in net income of $5,278,000, SUNW's EPS also increased (by $0.20) from $-0.5 in Q4 2021 to $-0.3 in Q1 2022 Overall, it seems as though SUNW had a good financial performance, as many of their financial metrics grew, most notably their EPS (by $0.20), as well as their net income (by $5,278,000), and other metrics (as you can tell from the above bullet points). Overall, this earnings report is better, more consistent, and shows a better outlook for the SUNW stock. Zero Quarterly SUNW Share Dilution  As part of their Q1 2022 earnings release, SUNW stated that they currently have 27.05M Shares Outstanding (weighted average), which is up 0 shares (from 27.05M shares outstanding in Q4 2021). Furthermore, SUNW stock has up to 0 of shares that they can issue (thereby diluting SUNW's stock). Overall, there has been no quarterly dilution in the SUNW stock, and there is not any dilution that can be foreseen (at the time of writing this), which is fantastic for the SUNW stock (and their investors). SUNW Analyst Ratings Split Between "Buy" and "Hold" Here is the current spread of SUNW stock ratings. In total there are 10 SUNW stock ratings, which fall in the following categories. 5 Buys 5 Holds 0 Sells Analyst Ratings have provided relatively strong indicators of future price movement, which is why they are used to determine if SUNW stock is a buy or sell. Overall, analysts are split evenly between "buy" and "hold" which makes the average rating lie somewhere between neutral and bullish, which is a good sign. Furthermore, there is not a single analyst that has given SUNW a "sell" rating. This is good to see as it implies that SUNW is at/below their fair value in all of the analysts forecasts. Solar Industry Outlook Through 2030 According to "ReportsandData" "Solar Energy is the cleanest and most promising alternative energy source with an annual flux that is nearly hundred times larger than global consumption". This is a main driver in why they think that the Solar Energy Market will register a revenue CAGR of 19.9% during the Forecast period (2022-2030). My SUNW Stock Prediction Using a Comparable Analysis to Determine a SUNW Price Forecast Price to Book (P/B): SUNW's current P/B ratio is 0.81, compared to the average P/B ratio of SUNW's peers being 0.85. This implies that SUNW is overvalued and their share price should change by a factor of 4.93% to be at fair value (based on SUNW's P/B compared to the P/B of their peers). Price to Sales (P/S): SUNW stock P/S ratio is currently 0.48, compared to the average P/S ratio of SUNW's peers being 1.38. This implies that SUNW is undervalued and their share price should change by a factor of 187.92% to be at fair value (based on SUNW's P/S compared to the P/S of their peers). Overall, SUNW stock is undervalued and needs to experience a change in stock price of (an average of) 96.42% to be considered “at fair value”. Is SUNW a good stock to buy right now? Overall, there seems to be many positives, and only 1 small negative when looking at the overall picture of the SUNW stock. Firstly, in terms of the positives: SUNW quarterly earnings (and some parts of their yearly earnings) was great; the industry outlook for solar is very attractive with a near 0% expected CAGR; Analysts are in consensus that SUNW is at/below their fair value; my comparable analysis also confirmed that SUNW stock may be undervalued; and there has been no quarterly dilution in the SUNW stock and it seems as though there won't be for the foreseeable future. However, it is not (quite) all sunshine and rainbows for the SUNW stock as their yearly financials were not ideal as their EBITDA and Net Income experienced large decreases. Overall, there is a lot more to be excited and positive about then there is to be negative about when looking at the SUNW stock. As a result of this, I would consider buying the SUNW stock and looking for a 20-30% return before considering exiting the position.

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SUNW Stock has a Bright Future in Solar and is Undervalued

bullish

general Analysis

[6 min Read]

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Photo by: Bill Mead

Today we are looking at Sunworks, Inc. (NASDAQ: SUNW), to determine if the SUNW stock is a good buy. We will look at SUNW financial ratios, analyst ratings, and valuation to determine a SUNW stock forecast and price.

What does SUNW Do?

Sunworks, Inc., through its subsidiaries, provides photovoltaic and battery-based power and storage systems for the agricultural, commercial, industrial, public works, and residential markets in the United States. It also designs, finances, integrates, installs, and manages systems ranging in size from 2 kilowatt for residential projects to multi megawatt systems for larger commercial and public works projects.

Laying out Information for a SUNW Stock Forecast

Who are Sunworks, Inc.'s Competitors?

In order to undergo a comparable analysis (to determine SUNW stocks value), we need to first outline who SUNW's competitors are.

These competitors need to be publicly listed, have valid financial metrics/multiples, operate in a similar manner to SUNW, and have a market cap similar to SUNW (if possible).

By keeping this in mind, I found the following list of companies to be some of SUNW stocks closest competitors:

FSLR, CSIQ, RUN, and JKS

Sunworks, Inc.'s Earnings are Confusing (in a good way?)

SUNW Earnings (Yearly):

  • SUNW Revenues: In FY 2021, SUNW experienced a yearly increase in revenues of $63.24M (or 166.81%) resulting in a total revenue figure of $101.15M.
  • SUNW Cost of Revenues: In FY 2021, SUNW experienced a yearly increase in their cost of revenues of $23.86M (73.1%), resulting in a total revenue figure of $56.51M. Since the increase (of 73.1%), in SUNW's cost of revenue was lesser (by -93.71%) than the increase (of 166.81%) in SUNW's revenues, we should expect that SUNW experienced an increase in their FY gross profits.
  • SUNW Gross Profit: In FY 2021, SUNW experienced a yearly increase in their gross profit of $39.38M (or 747.51%) resulting in a total gross profit of $44.65M. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between FY 2021 and FY 2020.
  • SUNW EBITDA: In FY 2021, SUNW experienced a yearly decrease in their EBITDA of $5,224,000 (or -37.11%) resulting in a total EBITDA of $-19.3M. This decrease is quite unusual given that their gross profits grew by such a large amount.
  • SUNW Net Income: In FY 2021, SUNW experienced a yearly decrease in their net income of $10,686,000 (or -67.04%) resulting in a total net income of $-26.63M.
  • SUNW EPS: Despite SUNW's decrease in net income of $10,686,000, SUNW managed to increase their EPS (by $0.04) from $-1.03 in FY 2020 to $-0.99 in FY 2021

Overall, this is kind of an odd earnings. Firstly, they grew their revenues, and gross profits by very sizable amounts. However, it got worse from there as they experienced large decreases in their yearly EBITDA and net income figures. However, their earnings got saved at the end due to their EPS actually gaining $0.04 YOY. For more clarification on their earnings, we can look to their more recent performances.

SUNW Earnings (Quarterly):

  • SUNW Revenues: In Q1 2022, SUNW experienced a quarterly decrease in revenues of $-478k (or -1.51%) resulting in a total revenue figure of $31.2M.
  • SUNW Cost of Revenues: In Q1 2022, SUNW experienced a quarterly increase in their cost of revenues of $493k (2.96%), resulting in a total revenue figure of $17.16M. Since the increase (of 2.96%), in SUNW's cost of revenue was greater (by 4.47%) than the decrease (of -1.51%) in SUNW's revenues, we should expect that SUNW experienced an decrease in their Q1 gross profits.
  • SUNW Gross Profit: In Q1 2022, SUNW experienced a quarterly decrease in their gross profit of $-971k (or -6.47%) resulting in a total gross profit of $14.03M. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between Q1 and Q4.
  • SUNW EBITDA: In Q1 2022, SUNW experienced a quarterly increase in their EBITDA of $2,665,000 (or 24.54%) resulting in a total EBITDA of $-8.2M. This increase (of 24.54%) is great to see, however, it once again is odd due to their gross profit decreasing by 6.5%.
  • SUNW Net Income: In Q1 2022, SUNW experienced a quarterly increase in their net income of $5,278,000 (or 39.14%) resulting in a total net income of $-8.21M.
  • SUNW EPS: As a result of SUNW's decrease in net income of $5,278,000, SUNW's EPS also increased (by $0.20) from $-0.5 in Q4 2021 to $-0.3 in Q1 2022

Overall, it seems as though SUNW had a good financial performance, as many of their financial metrics grew, most notably their EPS (by $0.20), as well as their net income (by $5,278,000), and other metrics (as you can tell from the above bullet points). Overall, this earnings report is better, more consistent, and shows a better outlook for the SUNW stock.

Zero Quarterly SUNW Share Dilution

As part of their Q1 2022 earnings release, SUNW stated that they currently have 27.05M Shares Outstanding (weighted average), which is up 0 shares (from 27.05M shares outstanding in Q4 2021). Furthermore, SUNW stock has up to 0 of shares that they can issue (thereby diluting SUNW's stock). Overall, there has been no quarterly dilution in the SUNW stock, and there is not any dilution that can be foreseen (at the time of writing this), which is fantastic for the SUNW stock (and their investors).

SUNW Analyst Ratings Split Between "Buy" and "Hold"

Here is the current spread of SUNW stock ratings. In total there are 10 SUNW stock ratings, which fall in the following categories.

  • 5 Buys
  • 5 Holds
  • 0 Sells

Analyst Ratings have provided relatively strong indicators of future price movement, which is why they are used to determine if SUNW stock is a buy or sell. Overall, analysts are split evenly between "buy" and "hold" which makes the average rating lie somewhere between neutral and bullish, which is a good sign. Furthermore, there is not a single analyst that has given SUNW a "sell" rating. This is good to see as it implies that SUNW is at/below their fair value in all of the analysts forecasts.

Solar Industry Outlook Through 2030

According to "ReportsandData" "Solar Energy is the cleanest and most promising alternative energy source with an annual flux that is nearly hundred times larger than global consumption". This is a main driver in why they think that the Solar Energy Market will register a revenue CAGR of 19.9% during the Forecast period (2022-2030).

My SUNW Stock Prediction

Using a Comparable Analysis to Determine a SUNW Price Forecast

  1. Price to Book (P/B): SUNW's current P/B ratio is 0.81, compared to the average P/B ratio of SUNW's peers being 0.85. This implies that SUNW is overvalued and their share price should change by a factor of 4.93% to be at fair value (based on SUNW's P/B compared to the P/B of their peers).
  2. Price to Sales (P/S): SUNW stock P/S ratio is currently 0.48, compared to the average P/S ratio of SUNW's peers being 1.38. This implies that SUNW is undervalued and their share price should change by a factor of 187.92% to be at fair value (based on SUNW's P/S compared to the P/S of their peers).

Overall, SUNW stock is undervalued and needs to experience a change in stock price of (an average of) 96.42% to be considered “at fair value”.

Is SUNW a good stock to buy right now?

Overall, there seems to be many positives, and only 1 small negative when looking at the overall picture of the SUNW stock. Firstly, in terms of the positives: SUNW quarterly earnings (and some parts of their yearly earnings) was great; the industry outlook for solar is very attractive with a near 0% expected CAGR; Analysts are in consensus that SUNW is at/below their fair value; my comparable analysis also confirmed that SUNW stock may be undervalued; and there has been no quarterly dilution in the SUNW stock and it seems as though there won't be for the foreseeable future. However, it is not (quite) all sunshine and rainbows for the SUNW stock as their yearly financials were not ideal as their EBITDA and Net Income experienced large decreases.

Overall, there is a lot more to be excited and positive about then there is to be negative about when looking at the SUNW stock. As a result of this, I would consider buying the SUNW stock and looking for a 20-30% return before considering exiting the position.

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SUNW

Sunworks, Inc.

3.85

-0.07
-1.79%

Return

-
Position Return %
0.00
Position Return
1.87
Price When Posted

Metrics

2.06
Target Price
8/ 10
Confidence
6-12 Months
Timeframe
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