Financial Statement Analysis 2015 V2

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Financial Statement Analysis 2015-2016
Assignment
First Solar Inc.

Group number: 32
First Name
Lan Hoang
Sayan
Stilyana V.
Zhenwei

Last Name
Nguyen
Ray
Radkova
Lu

1. Business Environment

ANR
636246
220823
966001
793286

Email Address
[email protected]
[email protected]
[email protected]
[email protected]

First Solar, Inc. is a NASDAQ-listed American photovoltaic (PV) manufacturer of rigid thin film modules, which also
provides utility-scale PV power plants and offers services including finance, construction, and maintenance and endof-life panel recycling. A SWOT analysis and a Porter’s 5 forces analysis of the company is provided in Data 1 & 2 in
the Appendix
2. Reformulation
First, operating and financial activities are separated. In the balance sheet Cash and cash equivalents are financial asset
for all years, since First Solar did not declare the need of working cash to run their business. Within Prepaid Expenses
and Other Current Assets we separated the Restricted Cash and Derivative instruments and presented them as financial
assets. Within Other Assets, Notes Receivable which are related to a credit facility agreement with a solar power
project entity of one of the customers of First Solar have been classified to the financial assets. Additionally Derivative
Instruments and Contingent considerations are included in the line Other Current Liabilities are allocated to the
financial liabilities since the contingent considerations were in connection with acquisitions that First Solar made. In
the cash flow statement, we incorporated Change in cash and cash equivalents as well as Contingent consideration
payments in the cash flows paid to debtholders in order to be consistent. With regard to dirty surplus flows, one hidden
dirty surplus flow, loss on share-based compensation plans, is needed to be added into the comprehensive income. It is
calculated based on the tax benefits reported in the Cash Flows Statement because information about intrinsic value
and exercised level for each type of award is not provided. Finally, corresponding numbers across individual
reformulated statements are matched. First, we restated the shareholders’ equity in the equity statement and the
balance sheet for share-based compensation and added this item to operating liability in the reformulated balance
sheet. First Solar does not report “share levels” of share-based compensation, hence we decided to focus on our
observing period and subtract share-based compensation in 2010-2014 from common equity. In addition, the (hidden)
dirty surplus flows are obtained from the equity statement and included in the income statement to calculate
comprehensive income. The reformulated statements are present in Table 1, 2, 3 and 4 in the appendix.
3. Past Performance
First Solar was not profitable in 2011 and 2012 as can be observed from its negative ROCE, but after that the firm
managed to steadily increase its profitability and realize positive ROCE in 2013 and 2014. Since the company had
positive NFA for the period 2011-2014, FLEV was negative. In 2011 and 2012, we identified that the main driver of
the ROCE is RNOA and its values were negative, but due to the beneficial effect from the financial leverage, the effect
from the RNOA was softened and ROCE was slightly increased. In 2013 and 2014, we witness the opposite situation,
RNOA has positive values which results in positive ROCE but negative FLEV combined with positive SPREAD
reduce ROCE to a value below RNOA. This means that some of shareholders' equity is invested and these financial
assets earned less than the operating assets. The RNOA is in turn determined by ROOA plus a leverage premium that
is determined by OLLEV and OLSPREAD. In order to calculate ROOA and OLSPREAD we need the implicit interest
rate (b) which is specified in our excel file. Regardless of the percentage of b that we took, we observed the same
trends. ROOA was negative for 2011 and 2012 and positive for the next two years. OLLEV was positive for all years,
which implied that the effect from the leverage premium would be beneficial if OLSPREAD is positive and
unfavorable if OLSPREAD is negative. In 2011 and 2012, the negative ROOA combined with the negative effect from
the leverage premium caused a lower negative value for RNOA and for 2013 and 2014 the positive ROOA was
accompanied with the beneficial effect of positive leverage premium resulting in higher RNOA. Additionally, RNOA
is product of PM and ATO. In 2011 and 2012, RNOA sales was positive but smaller than the negative RNOA other income,
resulting in a negative RNOA. This was due to the large difference between PM sales and PMother income. In 2013 and 2014,
RNOAsales was positive and higher than the negative RNOA other income leading to a positive RNOA. The negative effect of
RNOAother income reduced because of the increase in PM other income. The slight increase in the ATO had almost no influence
on RNOA.
The main driver of ΔPMsales was the varying net OIsales due to the volatile tax rate. We can see that OI sales before tax was
stable around 13-14% due to relatively stable gross profit and operating expenses. However, after the deduction of tax,
we got net OIsales which varied a lot across the different years. The drivers of ΔPM other income were the volatility in

restructuring and asset impairments expenses as well as in tax rates. They resulted into net OI other which varied in a
large range. The increase in ATO in 2011-2014 was driven by the increase in sales and the decrease in NOA. This
decrease in NOA was in turn driven by a decrease in operating assets (mainly in PPE, accounts receivables trade and
goodwill) and increase in operating liabilities (mainly in accounts payable, accrued expenses and payments and
billings for deferred project costs). First Solar generated positive growth in recent years, as can be observed from the
increasing trend in RI. This trend was determined by an increase in ROCE, however it was constantly lower than the
cost of equity capital, resulting in a negative values for the RI. The latter implies that the decrease in CSE over the
period 2011-2013 would be beneficial because it would soften the negative effect from the difference between ROCE
and r. As mentioned before, the increase in ROCE was driven mainly by an increase in RNOA in 2011-2014. In turn,
the increase in CSE was driven by the fact the decline in NOA and the increase in NFA.
4. Future performance
We have assumed that First Solar will go through two stages of growth – from 2015 to 2019 (five year period) the
company has a normal growth and from 2019 onwards the company achieves constant growth. During the period of
normal growth we forecast a sales growth rate of 4%. We have used the historical growth rate of ROCE (average yearon-year growth over the 5 year period between 2010 and 2014) to forecast the sales growth rate. We have then
forecasted the individual line items of the company’s reformulated income statement and balance sheet to provide an
overview of how changes in values of each individual line item affects CI and NOA. We have made the forecasts by
first calculating the margin ratios for the income statement and turnover ratios for the balance sheets for the years 2010
to 2014 and then used the average of these ratios to forecast line items in the income statement and the balance sheet
for years 2015 to 2019.
We use the three data points - sales growth rate, PM and ATO, to formulate the pro forma statement which contains
simple income statement, balance sheet and cash flow statement. The pro forma statement will be shown in the
appendix.
5. Valuation
The cost of equity is calculated by using the CAPM, with the average annual return on 10-year U.S. Treasury bond as
the risk-free rate and the average annual return of the S&P 500 index as the market return. We calculated the average
of these returns for the period 2005-2014. The reason for using inputs with longer durations is to assure that they are
less prone to fluctuations. We believe that the 10 years of historical data provides a sufficient window to estimate the
cost of equity - the period includes recent market events which might affect costs of raising capital, but will not
include past events (market stresses, recession etc. long time ago) which have no bearing on current costs of raising
capital for the company. The beta of First Solar is based on the information available at Google Finance.
We also make assumptions that the sales growth rate, post 2014, remains constant (at 4%), as do the PM and ATO.
Post 2019, to calculate the continuation value, we assume that the constant growth rate of the company is 4%. Since
this is the continuation value from 2019 onwards we discount the continuation value by the cost of equity to year
2014. The predicted value of equity can then be calculated as the present value of the residual income from 2014 to
2019 and the present value of the continuation value (as calculated above). The results are shown in the appendix.
6. Conclusion
First Solar is in a capital intensive but growing industry. While it faces challenges through international competition,
possible unavailability of inputs, and removal of subsidies, demand for products of First Solar is forecasted to grow on
the back of growth in demand for renewable energy. On the basis of the Residual Income Valuation approach we
ascertain that the value of the company is $25.85 (per share). Through a comparable analysis we ascertain the average
industry P/E ratio and the average P/B ratio (trailing) and using this and First Solar’s EPS we can calculate the
expected share price of First Solar, as in table 10 in the appendix. The current stock price is $65.99. On the basis the
above two valuation methodologies and the industry framework we believe that the stock price is undervalued at
current levels. We therefore recommend a BUY for the stock at current levels, with a profit booking advice at $91.19
for short term investors. This is in line with consensus analyst recommendations (Chart 1, Source: Financial Times).

APPENDIX
Abbreviations:
1. ROCE – Return On Common Equity
2. RNOA – Return on Net Operating Assets
3. NOA – Net Operating Assets
4. NBO – Net Borrowing Costs
5. FLEV – Financial Leverage
6. NFO – Net Financial Obligations
7. NFA – Net Financial Assets
8. OA – Operating Assets
9. OL – Operating Liabilities
10. FA – Financial Assets
11. FL – Financial Liabilities
12. CSE – Common Shareholder’s Equity
13. CI – Comprehensive Income
14. CAPM – Capital Asset Pricing Model
15. PM – Profit Margin
16. ATO – Asset Turn Over
17. OLSPREAD – Operating Liability Spread
18. SWOT – Strength Weakness Opportunity and Threat analysis
19. g – Constant growth rate
20. r – required rate of return on equity
Data 1: SWOT analysis of First Solar
Strengths:
1.
2.
3.
4.

First Solar is and industry leader in costs per module, approaching grid parity
The company currently has, and is forecasted to have cash and good operating income to expand
The company’s size of operations permits economies of scale
First Solar has initiated a collection and recycle program internally that makes it very competitive against
Chinese manufacturers that cannot promise this. This is essential and beneficial for utility projects which need
to be incredibly favorable by the public, and therefore must have the least impact- this recycling program
achieves this.
5. The company uses unique technology which cannot be easily duplicated by its competitors
Weaknesses:
1. The company faces not only competition from other American companies but also companies in Canada, in
Europe and Asia (particularly Japan).
2. Since the company works in renewable energy it receives government subsidies. Subsidies are harmful for the
long-term benefit of companies, because they artificially prop up industries that are not sustainable on their
own. After subsidies are eliminated, some companies have a risk of bankruptcy.
3. The company’s production facilities are dependant on Cadmium Telluride – a toxic (may lead to high
government regulations which affect operating expenses) and rare compound (may affect availability)

Opportunities:
1. Keeping in mind the growing demand of products related to renewable energy, in particular, solar energy, First
Solar has an established market demand for its products
2. Oil prices (though low at the current moment) have been at very high levels (on an average $80 per barrel)
which is leading a higher demand in renewables. This will fuel sales growth for the company.
Threats:
1. Third generation solar panels are going to be a reality in the near future and will be produced and applied
efficiently enough making second generation thin film cells, such as those produced by First Solar, obsolete.
2. Breakthroughs in other forms of renewable energy (such as geothermal, hydroelectric, wind, tidal wave etc.)
may affect the sales of First Solar as these are complimentary to First Solar’s products
3.
Data 2: Porter’s 5 forces analysis
Competition
First Solar, Inc. operates in the semiconductor- specialized industry, and competes with a number of firms in the solar
PV market, and solar energy market. The solar PV market is competitive and rapidly evolving. The worldwide market
for solar energy is growing at an annual growth rate exceeding 30% (Source: EuPD Research). Attracted by various
subsidies being provided by governments to promote renewable energy, many new firms are entering this industry and
established big industry players in the traditional energy business are diversifying into renewable energy. First Solar
faces direct competition from various domestic and international firms. The most direct competitor is Suntech (Source:
Yahoo Finance). These competitors have access to greater financial, technical, human marketing, purchasing or other
resources, which enable them react more quickly to new or emerging technologies or changes in customer
requirements. First Solar’s failure to sustain competition could result in price reductions, reduced margins, or loss of
market share.
Supplier Power
Supplier power is determined by how easy it is for suppliers to drive up prices and is driven by factors such as the
number of suppliers of each key input, the uniqueness of their product or service, and the cost of switching from one
to another. Overall the fewer the supplier choices a business has, and the greater the business’ need for suppliers help,
the more power suppliers could have over price and in any contractual agreements. First Solar uses approximately 30
types of raw materials and components to construct a complete solar module (Source: Company reports, analyst
reports). One critical raw material critical for production is cadmium telluride. Of the other raw materials and
components used for production the following eight are also critical: front glass coated with thermal conductive oxide,
cadmium sulphide, photo resist laminate, tempered black glass, cord plate/cord plate cap, lead wire and solar
connectors. First Solar purchases raw materials from a small number of suppliers, and most of the company’s critical
materials or components are either single sourced or supplied by a limited number of suppliers. The limited number of
suppliers and critical importance of the materials supplied by them poses the threat of power where suppliers could
increase prices. (Source: First Solar 10-K, 2010).
Buyer Power
Buyer power in the industry for solar energy is relatively strong. In the solar sector the products are primarily
differentiated on the basis of its cost/watt efficiency, which enables buyers to be very discriminant (Balayan et Al.,

2009). First Solar has significant marketing, distribution and manufacturing operations both within and outside the
United States. First Solar’s substantial international customer base subjects the company to a number of risks
including unfavorable political, regulatory, and tax conditions in the foreign countries of their customer base. A major
risk the firm faces is that it currently depends on a limited number of customers, with three customers accounting for
the majority of the module net sales. Even though First Solar’s long term supply contracts maintain power on the side
of the company rather than for buyers, once current contracts run out, buyer power will most likely be significantly
higher, as the renewable energy market will have further developed, and this could adversely impact profit and sales
for the business when renewing or establishing new customer contracts.
Barriers to New Entry
There are several barriers to entry in the solar power industry. One of the main barriers to entry is the vast amount of
research and development required to be able to manufacture a competitive technology at a competitive price (Balayan
et Al., 2009). Government and cultural interest in green technology and renewable energy make the solar sector
attractive to new firms; however as many governments, such as Germany and France, begin cutting back attractive
subsidies and incentives, the cost to enter the industry will rise, and may become a less attractive venture for new
companies (Harlin, 2011).4.5
Threat of Substitution
First Solar faces intense competition from manufacturers of crystalline silicon solar modules, thin-film solar modules,
and solar thermal and concentrated PV systems. The thin-film solar panel industry has several substitutes including
silicone based photovoltaic cells and other types of photovoltaic cells, and other types of renewable energy (Source:
First Solar, 10-k). The company could be affected by the increasing popularity of other renewable generation
technologies. The market for fuel cells is rapidly evolving and new technologies are being developed using fuel cells
to produce lower carbon emissions and generate high levels of electricity (Anderson et al). The hydrogen fuel cell
based on natural gas is becoming economically attractive in small-scale power generation applications and
transportation sectors (Anderson et al). It is projected that the market for these fuel cells would emerge as a new
source of distributed power after 2020 (Anderson et al). This kind of technology, which typically has a lower upfront
cost, is currently gaining preference, may lower the demand for the company’s products and services. Besides,
continuous research and development in these technologies could result in novel and efficient technologies that could
adversely affect the First Solar’s business.

Table 1
REFORMULATED STATEMENTS OF OPERATIONS (In thousands US dollars)
2014

2013

2012

2011

2010

3,391,814

3,308,989

3,368,545

2,766,207

2,564,709

2,446,235

2,515,796

1,794,456

2,563,515
1,378,669

827,105

862,754

852,749

971,751

1,184,846

Research and development

143,969

134,300

132,460

140,523

Selling, general and administrative

253,827

270,261

280,928

412,541

94,797
321,704
19,442

Net sales
Cost of sales
Gross profit
Operating expenses to generate sale

Production start-up

5,146

2,768

7,823

33,620

402,942

407,329

421,211

586,684

424,163

455,425

431,538

385,067

-29,578

-30,306

612,918

-101,943

435,943
748,903
-96,184

394,585

425,119

1,044,456

283,124

652,719

-86,896

-469,101

-453,731

-3,017

-259

-2,122

995

-3,468

210

5,800

-669,283

119,858

445

Currency translation gains (loss)

-19,147

4,295

9,896

-18,034

-35,825

Loss on share-based compensation plans

-57,880

-65,141

-50,836

-205838

-128824

-4,949

-163

309,803

282,755

-136,990

-273,627

485,047

Interest income

18,030

16,752

12,824

13,391

14,375

Interest expense, net

-1,982

-1,884

-13,888

-100

Other (expense) income, net

-5,203

-4,758

945

665

-756

-673

-169

-3695

-6
2,273
-2137

90,741

-39,685

26,813

21,580

14,358

4,322

-565

-21,493

18,660

3,820

Net financial income (net of taxes)

105,152

-30,813

5,032

50,501

32,683

Comprehensive income (available to common)

414,954

251,942

-131,958

-223,125

517,730

Total operating expenses
Operating income (loss) from sales (before tax)
Taxes on operating income from sales
Operating income (loss) from sales (net of tax)
Other operating income (expense) (before tax items)
Restructuring and asset impairments expense
Foreign currency loss, net
Taxes on other operating income
Other operating income (expense) (after tax items)

Equity in earnings of unconsolidated affiliates, net of
tax
Operating Income (after tax)
Financial income (expense)

Tax effects
Unrealized gain (loss) on marketable securities and
restricted investments
Unrealized gain (loss) on derivative instruments

Table 2
REFORMULATED BALANCE SHEETS (In thousands US dollars, except share data)
2014

2013

2012

2011

2010

135,434
76,971
505,088
125,083
29,354
91,565
20,728
1,402,304
46,393
810,348
222,326
255,029
84,985
119,236
115,617

136,383
521,323
388,951
133,731
556,957
63,899
132,626
1,385,084

553,567
400,987
434,921
98,903
21,390
44,070
49,521
1,525,382

310,568
533,399
475,867
53,784
197,702
41,144

305,537
1,482
195,863
4,579
14,446
388

1,815,958

1,430,789

845,478
317,473

497569
340,274

320,140
259,236

65,444

65,444

433,288

134,375
270,364
200,138
47,192
5,009,205

60,751

42,728

118,179
49,459
4,208,099

720,916
296,603
17,321
84,985
117,416
129,664
992
86,724
48,661
4,822,236

265,359
67,615
4,725,434

107,601
43,488
3,159,565

Operating Liabilities
Accounts payable
Income taxes payable
Accrued expenses
Billings in excess of costs and estimated earnings
Payments and billings for deferred project costs
Other current liabilities
Accrued solar module collection and recycling liability
Share-based compensation
Other liabilities
Total OL
Net Operating Assets (NOA)

$214,656
1,727
388,156
195,346
60,591
44,228
246,307
353,849
284,546
1,789,406
2,418,693

$261,333
6,707
320,077
117,766
642,214
133,550
225,163
308,668
404,381
2,419,859
2,402,377

$350,230
5,474
554,433
2,422
731,053
26,106
212,835
254,490
292,216
2,429,259
2,579,946

176,448
9,541
406,659
32,204
359,814
74,585
167,378
214,823
206,132
1,647,584
3,077,850

82,312
16,831
244,271

76,680
132,951
96,766
112,026
761,837
2,397,728

Financial Assets
Cash and cash equivalents
Marketable securities
Notes receivable, affiliate
Restricted cash and investments
Restricted cash (part of Prepaid expenses and other current assets)
Derivative instruments (part of Prepaid expenses and other current assets)
Notes receivable (part of Other assets)
Total FA

1,482,054
509,032
21,614
407,053
74,700
9,791
12,096
2,516,340

1,325,072
439,102

605,619
182,338

765,689
348,160

279,441

901,294
102,578
17,725
301,400

200,550

86,003

7996
9655
2,061,266

7,230
9,260
1,339,487

63,673

20,986

1,052,180

1,220,838

Operating Assets
Accounts receivable trade, net
Accounts receivable, unbilled and retainage
Inventories
Balance of systems parts
Deferred project costs
Deferred tax assets, net
Assets held for sale
Property, plant and equipment, net
PV solar power systems, net
Project assets and deferred project costs
Deferred tax assets, net
Investments in unconsolidated affiliates and joint ventures
Goodwill
Other intangibles, net
Inventories
Retainage
Prepaid expenses and other current assets
Other assets
Total OA

Financial liabilities

Current portion of long-term debt
Long-term debt
Derivative instruments (from Other current liabilities)
Contingent consideration (from Other current liabilities)
Total FL
Net Financial Assets
NOA+NFA
Common stock, $0.001 par value per share; 500,000,000 shares
authorized:
- 100,288,942 shares issued and outstanding at December 31, 2014
- 99,506,941 shares issued and outstanding at December 31, 2013
- 87,145,323 shares issued and outstanding at December 31, 2012
- 86,467,873 shares issued and outstanding at December 31, 2011
- 85,843,511 shares issued and outstanding at December 31, 2010,
respectively
Additional paid-in capital
Accumulated earnings
Accumulated other comprehensive income (loss)
Contingent consideration
Share-based compensation
Common shareholders equity

51,918
165,003
7,657
36,817
261,395
2,254,945
4,673,638

60,543
162,780
8,096
37,775
269,194
1,792,072
4,194,449

62,349
500,223
5,825

44,505
619,143
37,342

26,587
210,804
22,996

568,397
771,090
3,351,036

700,990
351,190
3,429,040

260,387
960,451
3,358,179

100

100

87

86

86

2,697,558
2,279,689
50,140

2,646,022
1,882,771
-25,776

2,065,527
1,529,733
10,179

2,022,743
1,626,071
-5,037

-353,849
4,673,638

-308,668
4,194,449

-254,490
3,351,036

-214,823
3,429,040

1,815,420
1,665,564
-27,243
1,118
-96,766
3,358,179

Table 3
REFORMULATED STATEMENTS OF CASH FLOWS (In thousands US dollars)
2014

2013

2012

2011

2010

3,366,839
-2,642,306
-17,045

3,868,540
-2,973,855
1,550

3,231,268
-2,447,337
21,543

2,290,944
-2,159,429
-46,153

2,458,088
-1,614,763
-80,064

Excess tax benefit from share-based compensation arrangements
Other operating activities
Tax benefit/tax paid on net interest received

-31,166
-698
376

-35,076
-2,343
-180

-27,373
-669
21,617

-110,836
-3,916
1,079

-69,367
-1,323
-1,654

Total cash flows from operating activities ( C )

676,000

858,636

799,049

-28,311

690,917

257,549
-1,532
72,692
4,306
24,967

282,576
-116,403

379,228
-5,083
21,659
2,437
5,000

731,814

588,914

21,105

296,496
-28,596
-1,301
855,513

Cash flows from operating activities:
Cash received from customers
Cash paid to suppliers and associates
Income tax (payments) refunds, net

Cash flows used in investing activities:
Purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment
Investment in notes receivable, affiliate
Acquisitions, net of cash acquired
Purchase of equity and cost method investments
Sale of investment in related party
Other investing activities
Total cash flows used in investing activities (I)
C–I
Cash flows paid to debtholders:
Interest received
Interest paid
Tax benefit/tax paid on net interest received
Purchases of marketable securities
Proceeds from maturities and sales of marketable securities
Payments received on notes receivable
Payments received on notes receivable, affiliate
Purchase of restricted investments
Change in restricted cash
Repayment of borrowings under revolving credit facility
Proceeds from borrowings under revolving credit facility
Repayment of long-term debt
Proceeds from borrowings under long-term debt, net of discount and
issuance costs
Repayment of economic development funding
Contingent consideration payments and other financing activities

30,745
17,905

1,857
359,839

3,533
218,356

403,241

-992
751,927

316,161

640,280

395,808

-780,238

-164,596

-12,966
7,601
376
305,396
-227,900

-6,599
9,289
-180
435,015
-93,984

-4,693
19,916
21,617
29,200
-108,663

-10,156
14,229
1,079
331,240
-492,613

-20,531
7,610
-1,654
462,070
-556,904
-61,658

-49,517

-17,108

62,749
23,154
450,000
-550,000
33,796

43,064

-5,173
605,000
-335,000
64,954

-4,498
80,667
-16,215
1,305,000
-1,375,000
178,842

8,315

6,820

-16,188

19,887

996

444

124,061

60,063

-100,000
27,879

-65,563

29,307

416

Net increase in cash and cash equivalents
Effect of exchange rate changes on cash and cash equivalents

156,982
19,487

423,778
-3,594

295,675
-6,307

-160,070
21,368

101,190
12,668

Total cash flows paid to debtholders (F)

347,327

1,104,600

423,357

-290,968

-85,850

-1,054

-176

-8,326

-9,379

-27,373

-69,367

-27,549

-110,836
-370,108
-489,270

Cash flows paid to shareholders:
Proceeds from stock option exercises
Excess tax benefit from share-based compensation arrangements
Proceeds from equity offering, net of issuance costs
Total cash flows paid to shareholders (d)

-31,166
-31,166

-35,076
-428,190
-464,320

F+d

316,161

640,280

395,808

-780,238

-164,596

0

0

0

0

0

Difference between C-I and F+d

-78,746

Table 4
REFORMULATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands US dollars)
Adjusted
Total
Equity
Balance, December 26, 2009

2,652,787

Stock issues for stock options
Issuance of restricted and unrestricted stock, taxes included
Common stock issued for acquisition
Contingent Consideration

199,770
-12,108
1,726
-1,726

Capital Contribution

187,662

Net income reported

664,201

Foreign currency translation adjustments
Unrealized gain (loss) on marketable securities and restricted investments

-35,825
14,358

Unrealized gain (loss) on derivative instruments
Loss on share-based compensation plans
Tax benefit

3,820
198,191
69,367
128,824

Loss on share-based compensation plans (after-tax)
Comprehensive Income
Balance, December 31, 2010
Stock issues for stock options
Issuance of restricted and unrestricted stock, taxes included
Common stock issued for acquisition
Contingent Consideration

517,730
3,358,179
318,088
-24,102
1,118
-1,118

Capital Contribution

293,986

Net income reported

-39,493

Foreign currency translation adjustments
Unrealized gain (loss) on marketable securities and restricted investments

-18,034
21,580

Unrealized gain (loss) on derivative instruments
Loss on share-based compensation plans
Tax benefit
Loss on share-based compensation plans (after-tax)
Comprehensive Income
Balance, December 31, 2011
Stock issues for stock options
Issuance of restricted and unrestricted stock, taxes included
Capital Contribution

18,660
316,674
110,836
205,838
-223,125
3,429,040
58,973
-5,019
53,954

Net income reported

-96,338

Foreign currency translation adjustments

9,896

Unrealized gain (loss) on marketable securities and restricted investments
Unrealized gain (loss) on derivative instruments
Loss on share-based compensation plans
Tax benefit

26,813
-21,493
-78,209
27,373

Loss on share-based compensation plans (after-tax)

-50,836

Comprehensive Income

-131,958

Balance, December 31, 2012
Stock issues for stock options
Issuance of restricted and unrestricted stock, taxes included
Common stock issued for acquisition
Common stock issued for public offering

3,351,036
91,504
-11,978
83,755
428,190

Capital Contribution

591,471

Net income reported

353,038

Foreign currency translation adjustments
Unrealized gain (loss) on marketable securities and restricted investments

4,295
-39,685

Unrealized gain (loss) on derivative instruments
Loss on share-based compensation plans
Tax benefit

-565
100,217
35,076

Loss on share-based compensation plans (after-tax)
Comprehensive Income

-65,141
251,942

Balance, December 31, 2013
Stock issues for stock options
Issuance of restricted and unrestricted stock, taxes included
Capital Contribution
Net income reported

4,194,449

396,918

Foreign currency translation adjustments

-19,147

87,335
-23,100
64,235

Unrealized gain (loss) on marketable securities and restricted investments
Unrealized gain (loss) on derivative instruments
Loss on share-based compensation plans
Tax benefit
Loss on share-based compensation plans (after-tax)
Comprehensive Income

90,741
4,322
-89,046
31,166
-57,880
414,954

Balance, December 31, 2014

4,673,638

Table 5
PAST PERFORMANCE: PROFIT AND GROWTH ANALYSIS
2014

2013

2012

2011

Summary information from balance sheets and income statements
Average OA
Average OL
Average NOA
Average NFA
Average CSE

4,515,168
2,104,633
2,410,535
2,023,509
4,434,044

4,915,721
2,424,559
2,491,162
1,281,581
3,772,743

4,867,320
2,038,422
2,828,898
561,140
3,390,038

3,942,500
1,204,711
2,737,789
655,821
3,393,610

Sales
Operating income from sales
Other operating income
Operating income
Net financial income (expense)
Comprehensive income

3,391,814
394,585
-84,782
309,803
105,152
414,954

3,308,989
425,119
-142,364
282,755
-30,813
251,942

3,368,545
1,044,456
-1,181,445
-136,990
5,032
-131,958

2,766,207
283,124
-556,751
-273,627
50,501
-223,125

Profit Analysis
Level 1: Effect of Leverage
ROCE = CI/CSE
RNOA = OI/NOA
FLEV = NFO/CSE
NBC = NFE/NFA
SPREAD = RNOA - NBC
Check ROCE = RNOA + FLEV*SPREAD

ROCE = RNOA + FLEV*SPREAD
9.36%
6.68%
-3.89%
12.85%
11.35%
-4.84%
-45.64%
-33.97%
-16.55%
5.20%
-2.40%
0.90%
7.66%
13.75%
-5.74%
9.36%
6.68%
-3.89%

-6.57%
-9.99%
-19.33%
7.70%
-17.69%
-6.57%

Operating Liability Leverage

RNOA = ROOA + OLLEV*OLSPREAD

Note: In order to calculate the ROOA and OLSPREAD we need the implicit interest rate (b). Usually, the short term borrowing
rate is used as a proxy for b. However, there was no information available in the notes of the firm's financial statements about
short term borrowing rate because First Solar did not have any short-term debt during this period. Therefore, we decide to try
several implicit interest rates (3%, 5% and 7%) to see the effects of operating liability leverage on RNOA in different cases.
RNOA = OI/NOA
b
ROOA = (OI + b*OL)/OA
OLLEV = OL/NOA
OLSPREAD = ROOA - b
Check RNOA = ROOA + OLLEV*OLSPREAD

12.85%
3.00%
8.26%
87.31%
5.26%
12.85%

11.35%
3.00%
7.23%
97.33%
4.23%
11.35%

-4.84%
3.00%
-1.56%
72.06%
-4.56%
-4.84%

-9.99%
3.00%
-6.02%
44.00%
-9.02%
-9.99%

RNOA = OI/NOA
b
ROOA = (OI + b*OL)/OA

12.85%
5.00%
9.19%

11.35%
5.00%
8.22%

-4.84%
5.00%
-0.72%

-9.99%
5.00%
-5.41%

OLLEV = OL/NOA
OLSPREAD = ROOA - b
Check RNOA = ROOA + OLLEV*OLSPREAD

87.31%
4.19%
12.85%

97.33%
3.22%
11.35%

72.06%
-5.72%
-4.84%

44.00%
-10.41%
-9.99%

RNOA = OI/NOA
b
ROOA = (OI + b*OL)/OA
OLLEV = OL/NOA
OLSPREAD = ROOA - b
Check RNOA = ROOA + OLLEV*OLSPREAD

12.85%
7.00%
10.12%
87.31%
3.12%
12.85%

11.35%
7.00%
9.20%
97.33%
2.20%
11.35%

-4.84%
7.00%
0.12%
72.06%
-6.88%
-4.84%

-9.99%
7.00%
-4.80%
44.00%
-11.80%
-9.99%

Level 2: Operating Profit Drivers
PM from sales = OI from sales/Sales
ATO
OI from sales/NOA = PM from sales*ATO
PM from others = Other OI/Sales
ATO
Other OI/NOA = PM from others*ATO
Check RNOA = PM*ATO

RNOA = (OI from sales + Other OI)/NOA
= (PM from sales + PM from others)*ATO
11.63%
12.85%
31.01%
10.24%
1.41
1.33
1.19
1.01
16.37%
17.07%
36.92%
10.34%
-2.50%
-4.30%
-35.07%
-20.13%
1.41
1.33
1.19
1.01
-3.52%
-5.71%
-41.76%
-20.34%
12.85%
11.35%
-4.84%
-9.99%

Level 3: Profit Margin and Asset Turnover Drivers
PM Drivers
Net sales
Cost of sales
Gross profit
Operating expenses to generate sale
Research and development
Selling, general and administrative
Production start-up
Total operating expenses
Operating income (loss) from sales (before tax)
Taxes
Operating income (loss) from sales (net of tax)
Other operating income (expense) (before tax items)
Restructuring and asset impairments expense
Foreign currency loss, net
Taxes on other operating income
Other operating income (expense) (after tax items)
Currency translation gains (loss)
Loss on share-based compensation plans

100%
75.61%
24.39%

100%
73.93%
26.07%

100%
74.68%
25.32%

100%
64.87%
35.13%

4.24%
7.48%
0.15%
11.88%
12.51%
-0.87%
11.63%

4.06%
8.17%
0.08%
12.31%
13.76%
-0.92%
12.85%

3.93%
8.34%
0.23%
12.50%
12.81%
18.20%
31.01%

5.08%
14.91%
1.22%
21.21%
13.92%
-3.69%
10.24%

0.00%
-0.09%
0.01%

-2.63%
-0.01%
0.18%

-13.93%
-0.06%
-19.87%

-16.40%
0.04%
4.33%

-0.56%
-1.71%

0.13%
-1.97%

0.29%
-1.51%

-0.65%
-7.44%

Equity in earnings of unconsolidated affiliates, net of tax
Operating Income (after tax)
Financial income (expense)
Interest income
Interest expense, net
Other (expense) income, net
Tax effects
Unrealized gain (loss) on marketable securities & restricted
investments
Unrealized gain (loss) on derivative instruments
Net financial income (net of taxes)
Comprehensive income (available to common)
ATO Drivers
1/ATO = NOA/Sales
Operating Assets
Accounts receivable trade, net
Accounts receivable, unbilled and retainage
Inventories
Balance of systems parts
Deferred project costs
Deferred tax assets, net
Assets held for sale
Property, plant and equipment, net
PV solar power systems, net
Project assets and deferred project costs
Deferred tax assets, net
Investments in unconsolidated affiliates and joint ventures
Goodwill
Other intangibles, net
Inventories
Retainage
Prepaid expenses and other current assets
Other assets
Total
Operating Liabilities
Accounts payable
Income taxes payable
Accrued expenses
Billings in excess of costs and estimated earnings
Payments and billings for deferred project costs

-0.15%
9.13%

0.00%
8.55%

0.00%
-4.07%

0.00%
-9.89%

0.53%
-0.06%
-0.15%
-0.02%

0.51%
-0.06%
-0.14%
-0.02%

0.38%
-0.41%
0.03%
-0.01%

0.48%
0.00%
0.02%
-0.13%

2.68%

-1.20%

0.80%

0.78%

0.13%
3.10%
12.23%

-0.02%
-0.93%
7.61%

-0.64%
0.15%
-3.92%

0.67%
1.83%
-8.07%

71.07%

75.28%

83.98%

98.97%

4.01%
8.82%
13.18%
3.82%
8.64%
2.29%
2.26%
41.09%
1.37%
22.57%
7.65%
4.01%
2.51%
3.49%
3.62%
0.03%
3.02%
1.45%

10.43%
13.94%
12.45%
3.52%
8.74%
1.63%
2.75%
43.98%

12.83%
13.87%
13.52%
2.27%
3.25%
1.26%
1.47%
49.60%

11.14%
9.67%
12.14%
1.05%
3.83%
0.75%

23.67%
9.28%
0.52%
2.27%
3.55%
3.99%
4.10%
4.33%
1.45%

19.94%
9.76%

14.78%
10.84%

1.94%

9.01%

2.90%
8.03%
6.91%
1.70%

1.87%

133.12%

148.56%

144.49%

142.52%

7.02%
0.12%
10.44%
4.62%
10.36%

9.24%
0.18%
13.21%
1.82%
20.75%

7.82%
0.22%
14.27%
0.51%
16.19%

4.68%
0.48%
11.77%
1.16%
13.01%

58.69%

6.74%
2.01%

Accrued solar module collection and recycling liability
Other liabilities
Other current liabilities

2.62%
6.95%
10.16%

2.41%
6.62%
10.53%

1.49%
5.64%
7.40%

2.73%
5.43%
5.75%

Total
Net Operating Assets

62.05%
71.07%

73.27%
75.28%

60.51%
83.98%

43.55%
98.97%

3,390,038
-3.89%
14.00%
-607,357

3,393,610
-6.57%
14.00%

Growth Analysis
Residual Income
CSE
ROCE
Cost of Equity Capital (r)
RI
AEG (ΔRI)
Explaining Growth
ΔRI(t)
ΔROCE(t)*CSE(t-2)
(ROCE(t) - r)*ΔCSE(t-1)
Explaining ΔROCE

Change in ROCE = ROCE(t) - ROCE(t-1)
Change in RNOA = RNOA(t) - RNOA(t-1)
Change in PM from sales = PM Sales(t) - PM Sales(t-1)
Change in PM other = PM Other(t) - PM Other(t-1)
Change in ATO = ATO(t) - ATO(t-1)
Check ΔRNOA
Change in Leverage = Leverage(t) - Leverage(t-1)
Change in FLEV = FLEV(t) - FLEV(t-1)
Change in SPREAD = SPREAD(t) - SPREAD(t-1)
Check ΔLeverage
Check ΔROCE
Explaining ΔCSE

Change in CSE
Change in NOA
Change in Sales

RI(t) = [ROCE(t) - r]*CSE(t-1)
4,434,044
3,772,743
9.36%
6.68%
14.00%
14.00%
-175,289
-248,375
73,086
358,982

ΔRI(t) = ΔROCE(t)*CSE(t-2) + (ROCE(t) - r)*ΔCSE(t1)
73,086
358,982
90,867
358,720
-17,781
262
ΔROCE(t) = ΔRNOA(t) + ΔLeverage
ΔRNOA(t) = ΔPM sales(t)*ATO(t) + ΔPM
other(t)*ATO(t)
+ (PM sales(t-1) + PM others(t1))*ΔATO(t)
ΔLeverage = ΔFLEV*SPREAD(t) + FLEV(t1)*ΔSPREAD
2.68%
10.57%
1.50%
16.19%
-1.21%
-18.16%
1.80%
30.77%
7.88%
13.75%
1.50%
16.19%
1.18%
-5.62%
-11.67%
-17.42%
-6.10%
19.49%
1.18%
-5.62%
2.68%
10.57%
ΔCSE(t) = ΔNOA(t) + ΔNFA(t)
ΔNOA(t) = Δ(Sale*1/ATO)
= ΔSale(t)*1/ATO(t-1) + Sale(t)*Δ(1/ATO)(t)
661,301
382,705
-80,627
-337,737
82,825
-59,556

Change in 1/ATO
Check ΔNOA
Change in NFA
Check ΔCSE

-4.22%
-80,627
741,928
661,301

-8.70%
-337,737
720,441
382,705

Table 6
Forecasts of key
income statement
ratios
Gross margin
SG&A expense ratio
Other operating income
margin
Operating margin
Financial income margin
Tax rate
Sales growth

2019E
2018E
2017E
2016E
2015E
27.7%
27.7%
27.7%
27.7%
27.7%
9.5%
9.5%
9.5%
9.5%
9.5%
-11.3%
3.4%
0.7%
35.0%
4.0%

-11.3%
3.4%
0.7%
35.0%
4.0%

-11.3%
3.4%
0.7%
35.0%
4.0%

-11.3%
3.4%
0.7%
35.0%
4.0%

-11.3%
3.4%
0.7%
35.0%
4.0%

2014
24.4%
11.9%

2013
26.1%
12.3%

2012
25.3%
12.5%

2011
35.1%
1.2%

-0.1%
9.1%
3.1%

-2.6%
8.5%
-0.9%

-14.0%
-4.1%
0.1%

-28.4%
0.0%
0.7%

2.5%

-1.8%

21.8%

7.9%

2014

2013

2012

2011

Forecasts of turnover
2019E

2018E

2017E

2016E

2015E

Accounts receivable
turnover

5.11

5.11

5.11

5.11

5.11

7.80

4.10

3.75

4.81

Inventory turnover

4.54

4.54

4.54

4.54

4.54

4.50

4.50

4.55

4.63

PPE turnover
Sales/Average project
costs

2.11

2.11

2.11

2.11

2.11

2.43

2.27

2.02

1.70

2.65

2.65

2.65

2.65

2.65

2.80

2.73

2.78

2.28

Sales/Intangibles

25.99

25.99

25.99

25.99

25.99

16.68

24.71

51.47

11.09

Sales/Prepaid expenses
Other OA/Sales
Sales/average accounts
payable
Other OL/Sales
Cash/Sales
Notes Receivable/Sales
Other FL/Sales
Accumulated OCI/Sales

21.37
18.4%

21.37
18.4%

21.37
18.4%

21.37
18.4%

21.37
18.4%

33.11
19%

23.07
17%

14.47
22%

14.83
16%

14.81
57%
43%
1%
1.1%
0%

14.81
57%
43%
1%
1.1%
0%

14.81
57%
43%
1%
1.1%
0%

14.81
57%
43%
1%
1.1%
0%

14.81
57%
43%
1%
1.1%
0%

14.25
46%
58%
1%
1.3%
1%

10.82
65%
48%
1%
1.4%
-1%

12.79
62%
36%
1%
0.2%
0%

21.38
53%
29%
2%
1.3%
0%

Table 7
Assumptions:

2,011

2,012

2,013

2,014

2,015

2,016

2,017

2,018

2,019

Sales growth rate

0.08

0.22

(0.02)

0.03

0.04

0.04

0.04

0.04

0.04

PM

(0.10)

(0.04)

0.09

0.09

0.05

0.05

0.05

0.05

0.05

ATO

0.84

1.05

1.28

1.16

1.11

1.11

1.11

1.11

1.11

Pro Forma Statement
Income statement

2010A

2011A

2012A

2013A

2014A

2015E

2016E

2017E

2018E

2019E

Sales=Previous
Sales*(1+growth rate)

2,563,515 2,766,207 3,368,545

3,308,989 3,391,814

3,527,48
7

3,668,586

3,815,329

3,967,94
3

4,126,660

OI=Sale*PM

485,047

(273,644)

(136,970)

282,806

309,868

159,648

166,034

172,676

179,583

186,766

NFE=NBC*(0,5*Previo
us NFO+0,5*NFO)

(32,683)

(50,519)

(5,012)

30,864

(105,086)

(25,361)

(25,376)

(25,652)

(25,850)

(26,336)

CI=OI-NFE
Balance sheet

517,730

(223,125)

(131,958)

251,942

414,954

185,010

191,411

198,328

205,432

213,102

NOA

2,397,728 3,077,850 2,579,946

2,402,377 2,418,693

2,621,64
7

2,659,888

2,689,137

2,707,14
0

2,711,212

NFO=((1+0,5*NBC)*Pr
evious NFO-F)/(10,5*NBC)

960,451

1,792,072 2,254,945

2,130,29
4

2,208,595

2,289,288

2,372,38
1

2,458,250

2,397,728 3,077,850 2,579,946

2,402,377 163,748

4,751,94
1

4,868,483

4,978,425

5,079,52
1

5,169,461

(164,596)

(780,238)

395,808

640,280

316,161

215,457

396,906

423,305

452,653

485,410

F=(C-I)-d

(85,850)

(290,968)

423,357

1,104,600 347,327

215,457

396,906

423,305

452,653

485,410

d

(78,746)

(489,270)

(27,549)

(464,320)

-

-

-

-

-

CSE=Previous
CSE+CI-d
Cash flow statement
C-I=OI-(NOA-Previous
NOA)

351,190

771,090

(31,166)

Residual Income
Model
2010A

2011A

2012A

2013A

2014A

2015E

2016E

2017E

2018E

2019E

CI

517,730

(223,125)

(131,958)

251,942

414,954

185,010

191,411

198,328

205,432

213,102

CSE
ReOI:

3,358,179 3,429,040 3,351,036

4,194,449 4,673,638

4,751,94
1

4,868,483

4,978,425

5,079,52
1

5,169,461

CI

517,730

(223,125)

(131,958)

251,942

414,954

185,010

191,411

198,328

205,432

213,102

r*Previous CSE

470,145

480,066

469,145

587,223

654,309

665,272

681,588

696,980

711,133

RI

(693,270)

(612,023)

(217,203)

(172,269)

(469,300)

(473,861)

(483,260)

(491,547
)

(498,031)

CV

(5,179,52
5)

ve

331,384

vf

2,586,329

Table 8
Full Forecast income statement
Net sales
Cost of sales
Gross profit
Research and development
Selling, general and administrative
Production start-up
Total operating expenses to generate sales
Operating income (loss) from sales (before tax)
Taxes
Operating income (loss) from sales (net of tax)
Other operating income (expense) (before tax items)
Restructuring and asset impairments expense
Foreign currency loss, net
Taxes on other operating income
Other operating income (expense) (after tax items)
Currency translation gains (loss)
Loss on share-based compensation plans
Equity in earnings of unconsolidated affiliates, net of tax
Operating Income (after tax)
Financial income (expense)
Interest income
Interest expense, net
Other (expense) income, net
Tax effects
Unrealized gain (loss) on marketable securities & restricted investments
Unrealized gain (loss) on derivative instruments
Net financial income (net of taxes)
Comprehensive income (available to common)

2019E
$4,126,660
2,982,515
1,144,145

2018E
$3,967,943
2,867,803
1,100,140

2017E
$3,815,329
2,757,503
1,057,827

2016E
$3,668,586
2,651,445
1,017,141

2015E
$3,527,487
2,549,466
978,020

391,096
753,049
263,567
489,482
-465,778

376,054
724,086
253,430
470,656
-447,863

361,591
696,236
243,683
452,554
-430,638

347,683
669,458
234,310
435,148
-414,075

334,311
643,709
225,298
418,411
-398,149

-163,022
-302,755
0
0
0
186,726

-156,752
-291,111
0
0
0
179,545

-150,723
-279,914
0
0
0
172,639

-144,926
-269,149
0
0
0
165,999

-139,352
-258,797
0
0
0
159,614

2014A
$3,391,814
2,564,709
827,105
143,969
253,827
5,146
402,942
424,163
29,578
394,585
-3,227
0
-3,017
-210
-3,017
-19147
-57880
-4,949
309,803

26,375

25,888

25,689

25,412

25,395

18,030.00
(1,982.00)
(5,203.00)
756.25
90,741.00
4,322.00
105,152

213,102

205,432

198,328

191,411

185,010

414,954

Table 9
Full forecast balance sheet

2019E

2018E

2017E

2016E

2015E

2014A

Accounts receivable

807,027.02

775,987.52

746,141.85

717,444.09

689,850.08

212,405

Inventories

656,268.82

631,027.71

606,757.41

583,420.59

560,981.34

620,705

Project costs

1,557,859.93

1,497,942.24

1,440,329.08

1,384,931.81

1,331,665.20

1,011,178

Property, plant and equipment, net

1,958,591.53

1,883,261.09

1,810,827.97

1,741,180.74

1,674,212.25

1,402,304

Goodwill and other intangibles, net

204,221.00

204,221.00

204,221.00

204,221.00

204,221.00

Prepaid expenses and other current assets

193,097.44

185,670.62

178,529.44

171,662.92

165,060.50

Operational Assets

Other assets
Total

$759,637.98

$730,421.14

$702,328.02

$675,315.40

$649,341.73

6,136,703.73

5,908,531.32

5,689,134.77

5,478,176.55

5,275,332.10

204,221.00
118,179
639,107.00
4,208,099.00

Operational Liabilities
Accounts payable

278,615.60

267,899.61

257,595.78

247,688.25

238,161.78

214,656.00

Other liabilities

3,146,876.46

2,933,491.94

2,742,401.93

2,570,600.02

2,415,523.24

1,574,750.00

Total

3,425,492.05

3,201,391.55

2,999,997.71

2,818,288.27

2,653,685.02

1,789,406.00

Net Operating Assets

2,711,211.68

2,707,139.77

2,689,137.06

2,659,888.27

2,621,647.08

2,418,693.00

Financial Assets
Cash & cash equivalents

2,389,271.49

2,297,376.43

2,209,015.80

2,124,053.65

2,042,359.28

1,963,807.00

Marketable securities

361,923.37

348,003.24

334,618.50

321,748.55

309,373.61

509,032.00

Notes receivable, affiliate

52,960.44

50,923.50

48,964.90

47,081.64

45,270.81

43,501.00

Total

2,804,155.29

2,696,303.16

2,592,599.20

2,492,883.84

2,397,003.69

2,516,340.00

Financial liabilities
Short term and Current portion of long-term debt
Long-term debt
Other liabilities

302,366.05
-

280,081.14

232,389.15

170,165.74

116,510.22

51,918.00

1,976.00

30,667.00

75,417.00

112,982.00

165,003.00

43,539.66
Total

41,865.05

40,254.86

38,706.59

37,217.88

44,474.00

345,905.70

323,922.19

303,311.00

284,289.33

266,710.10

261,395.00

Net Financial Assets

2,458,249.59

2,372,380.97

2,289,288.19

2,208,594.51

2,130,293.60

2,254,945.00

NOA+NFA

5,169,461.26

5,079,520.74

4,978,425.25

4,868,482.78

4,751,940.68

4,673,638.00

Common stock, $0.001 par value per share; 500,000,000 shares authorized; 100,288,942 and 99,506,941 shares issued and outstanding at December 31, 2014 and 2013,
respectively

100

Additional paid-in capital

2,697,558.00

2,697,558.00

2,697,558.00

2,697,558.00

2,697,558.00

2,697,558.00

Accumulated earnings

3,272,970.76

3,059,869.15

2,854,436.93

2,656,109.18

2,464,698.59

2,279,689.00

Accumulated other comprehensive income (loss)

8,453.29

8,128.17

7,815.54

7,514.95

7,225.91

50,140.00

Contingent consideration
Share-based compensation
Common shareholders’ equity

(809,520.79)
5,169,461.26

(686,034.57)
5,079,520.74

(581,385.23)
4,978,425.25

(492,699.35)
4,868,482.78

(417,541.82)
4,751,940.68

(353,849.00)
4,673,538.00

Notes on our approach to the full income statement and balance sheet forecast:
1. In the balance sheet, for the forecasted years, we have adjusted short term debt and marketable securities to match NOA+NFA and
CSE.
2. A one-time increase in interest expense (interest expense net of tax has been increased) had been made to reflect adjustments to short
term investments.

Table 10
Company name
FSLR

Price

EPS

P/E ratio

Price-tobook rati0

Price-tosales ratio

65.99

5.63

11.72

1.32

1.96

30.01

0.36

84.22

2.57

1.35

TSL

First Solar, Inc.
Sun Power
Corporation
Trina Solar Limit...

11.02

0.77

14.3

0.97

0.44

CSIQ

Canadian Solar Inc.

28.96

3.17

9.14

2.23

0.54

GE

General Electric ...

31.14

0.31

101.06

2.44

2.12

NEE

NextEra Energy Inc

103.89

6.98

14.89

2.31

2.81

45.17

2.87

39.22

1.97

1.54

SPWR

Industry average

No of shares
outstanding
(mn)
FSLR

First Solar, Inc.

100.92

EPS

BVPS
3.97

46.71

Ve from RI
valuation
approach
2,586,328.72

Predicted
Price
through
EPS
155.71

Actual

Predicted
Price
through
BV
92.0187

Predicted
Price
through RI
25.85

Average
predicted
price
91.1929

Chart 1

*Source: Financial Times website

Additional Notes


With regard to First Solar’s business environment, First Solar now competes against conventional power generators and has reduced
its focus on the rooftop market. As this company shifts its focus away from module sales to utility-scale projects, it will need to
become price competitive with non-solar power sources. However, First Solar is the first solar panel manufacturing company to
successfully reduced manufacturing costs and optimized efficiency, which makes it more competitive in its industry.

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