First Solar Inc (FSLR)

Conclusion

First Solar, Inc. is a Phoenix-based solar technology company that designs and sells photovoltaic modules made with thin-film cadmium telluride semiconductor technology, mainly to system developers, utilities and independent power producers. At a price of 191.61 USD on 9 November 2026, its market capitalisation is 20.6 billion USD.

The verdict is overvalued. The fair value band runs from 99.92 to 149.88 USD with a midpoint of 124.90 USD, giving a margin of safety of -34.8% at the current price. Price-to-earnings of 11.1x sits well below its ten-year median of 18.0x, and enterprise value to EBITDA of 7.6x sits below 11.6x, but price-to-sales of 4.1x and price-to-book of 1.9x are above their medians. The discounted cash flow gives 32.36 USD per share. The reverse DCF implies growth of 37.8% a year, against five-year revenue growth of 14.0% and three-year growth of 25.8%.

What holds the case up is a strong balance sheet, with net debt to EBITDA of -0.51 (a net cash position) and an Altman Z-score of 5.84, and a high operating margin of 37.7%. Return on invested capital of 19.8% against a WACC of 13.4% is also a strength. The weakest numbers are five-year free cash flow conversion of -5.9%, a free cash flow yield of 1.1%, and the DCF value of 32.36 USD, far below the price.

Financial health

Financial strength is green, supported by every measure assessed. The current ratio is 2.57 and the quick ratio is 1.70, both comfortable. The company has net cash, with net debt to EBITDA of -0.51, debt to equity of 0.03, and interest coverage of 72.9. The Altman Z-score of 5.84 falls in the safe zone; the model was designed for manufacturers, and First Solar is one. Insolvency risk: low, about 0.03% by the estimate of the Ohlson model over one to two years. This balance sheet gives the company room to fund its operations without relying on outside credit.

Earnings quality

Earnings quality is yellow. Piotroski's score is 7 of 9, and the accrual ratio of -4.2% suggests cash generation is keeping pace with reported profit. Against that, free cash flow conversion is 12.5% on a trailing basis but -5.9% over five years, which is the weak point. Stock-based compensation is 0.5% of revenue, and free cash flow after it is 207.4 million USD. The five-year share count rose at a compound rate of 0.16%, so there are no net buybacks. The Beneish M-score is not available. Over the last eight quarters the company beat estimates four times and missed four times, with an average surprise of 4.3%. For the current year, three estimates were cut in the last 30 days and none raised.

Profitability

Profitability is green. The gross margin is 49.3% against a ten-year median of 23.5%, and the operating margin is 37.7% against a median of 8.9%. The net margin is 37.1% against 10.6%. Return on invested capital is 19.8% against a WACC of 13.4%, a gap of 6.4% that the model labels as value creating. The five-year median return on invested capital is 16.8%. Return on equity is 17.1%. The DuPont split shows the return rests mainly on margin: a net margin of 29.3% and an asset turnover of 0.39, with an equity multiplier of only 1.40, so leverage contributes little. Operating margin stability is 1.57.

Growth

Growth is green. Revenue compounded at 25.8% over three years, 14.0% over five years and 2.4% over ten years. Revenue grew in six of the last ten years. Earnings per share compounded at 30.7% over five years and 9.3% over ten years. Analysts expect earnings per share to grow 31.4% next year, though the change in that estimate over 90 days is only 0.4%. The ten-year record is much weaker than the recent three-year record, so the recent pace may not persist. The rating reflects recent performance rather than a long track record.

Valuation

Valuation is red. Price-to-earnings is 11.1x against a ten-year median of 18.0x, a discount of 38.5%, and enterprise value to EBITDA is 7.6x against 11.6x, a discount of 34.7%. Price-to-sales is 4.1x against 3.0x, a premium of 38.0%, and price-to-book is 1.9x against 1.5x, a premium of 29.5%. Price to free cash flow is 88.5x, with no usable median. The discounted cash flow gives 32.36 USD per share, at a discount rate of 13.4% and a growth rate of 14.0% for the first stage. The fair value from historical multiples is 217.44 USD, so the two methods differ widely. The reverse DCF implies 37.8% growth, compared with a reference value of 23.8%. The fair value band is an estimate built on fixed assumptions, a 5% equity risk premium and capped growth, not a price target. The company pays no dividend, so the dividend yield is zero.

Risks

Weak free cash flow conversion is the main risk: a five-year figure of -5.9% means reported earnings have not reliably turned into cash, and a weaker cash flow would make the 1.1% free cash flow yield harder to defend. A high price-to-sales and price-to-book against their history would fall further if growth slows, as the reverse DCF needs 37.8% growth. Downward estimate revisions for the current year would weaken the outlook, and the beta of 1.71 means the share price can move sharply. The Beneish M-score is not available, and the company's debt maturity schedule and revenue by segment are not included, so the analysis cannot assess refinancing risk or how much each business line contributes. These limits mean the valuation view should be treated as a rough estimate.