What is FSLR's Intrinsic value?

First Solar Inc (FSLR) Intrinsic Value Analysis

Executive Summary

As of June 6, 2025, First Solar Inc's estimated intrinsic value ranges from $152.13 to $207.30 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $207.30 +26.5%
Discounted Cash Flow (5Y) $183.53 +12.0%
Dividend Discount Model (Multi-Stage) $152.13 -7.1%
Dividend Discount Model (Stable) $172.94 +5.6%

Is First Solar Inc (FSLR) undervalued or overvalued?

With the current market price at $163.84, the stock appears to be moderately undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate First Solar Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.93 1.12
Cost of equity 8.2% 11.2%
Cost of debt 5.0% 5.0%
Tax rate 14.1% 25.5%
Debt/Equity ratio 0.04 0.04
After-tax WACC 8.0% 10.9%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 9.4% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $4,206 (FY12-2024) to $7,829 (FY12-2034)
  • Net profit margin expansion from 31% to 32%
  • Capital expenditures maintained at approximately 29% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $184 $19,400M 74.0%
10-Year Growth $207 $21,950M 56.5%
5-Year EBITDA $345 $36,699M 86.3%
10-Year EBITDA $353 $37,558M 74.6%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 9.7%
  • Long-term growth rate: 3.0%
  • Fair value: $152.13 (-7.1% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 11.2% (Low) to 8.2% (High)
  • Long-term growth rate: 2.0% (Low) to 4.0% (High)
  • Fair value range: $90 to $256
  • Selected fair value: $172.94 (5.6% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $17570M
Enterprise Value $17289M
Trailing P/E 13.89
Forward P/E 13.88
Trailing EV/EBITDA 14.40
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.04

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 33% $62.19
Discounted Cash Flow (5Y) 28% $45.88
Dividend Discount Model (Multi-Stage) 22% $30.43
Dividend Discount Model (Stable) 17% $25.94
Weighted Average 100% $182.71

Investment Conclusion

Based on our comprehensive valuation analysis, First Solar Inc's weighted average intrinsic value is $182.71, which is approximately 11.5% above the current market price of $163.84.

Key investment considerations:

  • Strong projected earnings growth (31% to 32% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.04)

Given these factors, we believe First Solar Inc is currently moderately undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.