Increasing the share of electricity produced from solar energy is a critical goal in combating the effects of global climate change. Consequently, solar businesses have been experiencing rampant sales growth, and the worldwide market is expected to grow roughly 7% annually until 2030. Therefore, investing in solar stocks to buy is likely to prove lucrative over time.
While ESG investors will look at solar power stocks to generate robust returns, these stocks have proven to be incredibly volatile. Solar stocks have a history of making big moves relatively quickly. However, for the most part, these stocks have moved sideways over the past couple of years.
Therefore, investing in solar stocks with the strongest fundamentals and track records is imperative. Here are three of my top picks in the sphere.
Solar Stocks To Buy: SolarEdge Technologies (SEDG)
SolarEdge Technologies (NASDAQ:SEDG) produces innovative solar power solutions, which include energy optimizers, inverters, and monitoring systems. The Israeli-based renewable energy giant operates a profitable business that grows at a breathtaking pace each quarter. Over the past five years, revenue and EBITDA growth have averaged a stellar 39.5% and 37.4%, respectively.
Perhaps the best thing about the business is that it is already non-GAAP profitable and has a whopping cash balance of $1 billion. This means it can continue investing in the business until it reaches scale. Moreover, its robust financial flexibility positions it for long-term growth in the renewable energy space.
It flipped the negative trend with better-than-expected earnings results in its fourth quarter. Topping expectations at a healthy $1.27, the company posted $890 million in sales, a 61% improvement on a year-over-year basis. The weaknesses in the U.S. residential markets have been effectively offset by increased demand from Western Europe.
Enphase Energy (ENPH)
Enphase Energy (NASDAQ:ENPH) was an anomaly among growth stocks that performed relatively well last year. The European energy crisis and the U.S. Inflation Reduction Act provided some robust tailwinds for the company.
Enphase is a top renewable energy business that effectively markets residential energy solutions for the global solar photovoltaic industry. It provides micro-invertors that can effectively transform energy at the individual solar panel level, integrating them with its exclusive networking and software technologies. The company boasts a leadership position among micro-inverters, shipping over 4.8 million units during the fourth quarter alone.
Revenue growth rates have been spectacular for the firm over the past five years, averaging close to 50%. Additionally, it operates an A-graded business from a profitability standpoint, generating 11% and 36.6% net income and gross margins over the past five years. Moreover, it’s been a tremendous wealth compounder generating more than 3,000% price returns over the past decade. Astonishingly, analysts at Tipranks point to a 52% upside from current price levels.
Daqo New Energy (DQ)
Daqo New Energy (NYSE:DQ) manufactures monocrystalline silicon and polysilicon used to produce solar photovoltaic systems. It operates an excellent business from a fundamentals standpoint, generating double-digit top and bottom-line growth over the past several years.
Moreover, it benefits from political tailwinds that strongly favor clean energy. China aims to produce 1,200 gigawatts (GW) of wind and solar power energy by 2030 and for 25% of its energy consumption to be met by non-fossil renewables by the conclusion of the current decade.
As we advance, Daqo expects to expand annual polysilicon production by 100,000 metric tons to a total of 305,000 by the close of 2023. On top of that, average selling prices remain relatively strong, contrary to what the bears say at this point. Also, with the stock trading at just 1 times forward sales estimates, and a 62% discount to its 5-year average, it’s an ideal time to wager on DQ stock.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.