While significant emphasis is being placed on almost all clean energy sources globally, the solar power segment is attracting much investor attention and capital investments. Government incentives and declining installation and maintenance costs are also driving the solar energy market, which is expected to grow at a 20.5% CAGR over the next five years to $223.30 billion by 2026.

The industry is expected to remain constrained by the impact of supply chain bottlenecks and equipment shortages over the next few years, however. Furthermore, a global semiconductor chip shortage is affecting the industry’s production targets because semiconductors are a crucial component in  battery storage and solar inverters.

So, although the solar industry’s long-term outlook remains bright, we think its bleak short-term growth prospects make highly overvalued stocks Sunnova Energy International Inc. (NOVA), Beam Global (BEEM), and Solar Integrated Roofing Corporation (SIRC) best avoided now.

Sunnova Energy International Inc. (NOVA)

NOVA, together with its subsidiaries, provides residential solar and energy storage services. The company also offers operations and maintenance, monitoring, repairs and replacements, equipment upgrades, on-site power optimization, and diagnostics services.

NOVA’s 29.37 forward EV/Sales multiple is 565.5% higher than the 4.41 industry average. In terms of forward Price/Sales, NOVA is currently trading at 18.33x, which is 637.8% higher than the 2.48x industry average.

NOVA’s operating loss increased 178.9% year-over-year to $14.34 million in its  fiscal second quarter ended June 30. Its net loss increased 151% from its  year-ago value to $63.40 million. The company’s net loss per share increased 90% year-over-year to $0.57.

A $65.03 million consensus revenue estimate for the fiscal third quarter, ending September 30, 2021, indicates a 29.6% improvement from the same period last year. However, analysts expect the company’s EPS to remain negative at least until the following year. The company missed consensus EPS estimates in each of the trailing four quarters.

NOVA has lost 16.4% year-to-date. Over the past six months, the stock’s price has  declined 18.1% to close yesterday’s trading session at $37.32.

NOVA’s POWR Ratings reflect its poor prospects. The stock has an overall F rating, which equates to Strong Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

NOVA has an F  grade for Value, Sentiment, and Quality, and D for Momentum and Stability. Among the 21 stocks in the F-rated Solar industry, NOVA is ranked #18.

Beyond what we’ve stated above, we have also rated NOVA for Growth. Click here to view all NOVA ratings.

Beam Global (BEEM)

BEEM designs, manufactures, and sells renewable energy products for electric vehicle (EV) charging infrastructure, outdoor media and branding, and energy security products. The company  produces primarily two categories of products: EV ARC (Electric Vehicle Autonomous Renewable Charger) and the Solar Tree.

In terms of forward EV/Sales, BEEM is currently trading at 21.36, which is 1,010.3% higher than the 1.92 industry average. In addition, its 23.18 forward Price/Sales multiple is 1,397.4% higher than the 1.55 industry average.

BEEM’s gross loss increased 276.2% year-over-year to $0.15 million in its fiscal first quarter, ended March 31. Its loss from operations grew 32.9% from its year-ago value to $1.25 million, while its net loss increased 32.7% year-over-year to $1.25 million.

Analysts expect BEEM’s revenues to increase 75.2% year-over-year to $10.88 million in the current year. However, the company’s EPS is expected to remain negative at least until next year. Also, BEEM missed the Street’s EPS estimates in three of the trailing four quarters.

Shares of BEEM have retreated 56.2% in price over the past six months and 60.5% year-to-date.

It is no surprise that BEEM has an overall F rating, equating to Strong Sell in our proprietary POWR Ratings system. The stock also has an F grade for Value, Stability, and Quality, and a D grade for Growth and Sentiment. In addition, it is ranked #20 in the  Solar industry.

To see more of BEEM’s component grades, click here.

Solar Integrated Roofing Corporation (SIRC)

SIRC is an integrated, single-source solar power, HVAC, and roofing systems installation company. It specializes in commercial and residential properties with a focus on acquisitions of similar companies.

SIRC’s 9.43 trailing-12-months EV/Sales multiple is 358.3% higher than the 2.06 industry average. In terms of trailing-12-months Price/Sales, SIRC is currently trading at 3.64x, which is 119.8% higher than the 1.66x industry average.

SIRC’s net loss from operations increased 1,921.1% year-over-year to $2.67 million in the three months ended May 31. Its net loss stood at $0.86 million, up 87.8% from the same period last year.

SIRC slumped 73.2% over the past six months to close yesterday’s trading session at $0.40. The stock has lost 29.4% over the past month.

SIRC’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, which equates to Strong Sell. SIRC also has an F for Value, Stability, and Quality, and a D for Growth and Momentum. It is ranked the last in the Solar industry.

Click here to view the SIRC rating for Sentiment and additional details.

NOVA shares were trading at $37.38 per share on Thursday afternoon, up $0.06 (+0.16%). Year-to-date, NOVA has declined -17.17%, versus a 18.66% rise in the benchmark S&P 500 index during the same period.

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.

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