In line with this, the Zacks Consensus Estimate for Real Goods Solar’s first-quarter bottom line shows an improvement of 97.6%, when compared to the prior year quarter’s reported figure. Nevertheless, higher revenues generated from the sale of the POWERHOUSE shingles should boost the company’s quarterly earnings significantly. This delay might have an unfavorable impact on the company’s bottom-line performance in the soon-to-be-reported quarter. This in turn led to a significant delay in the commercialization of the POWERHOUSE solar shingles. The company, which had previously expected to obtain the UL product certification in early 2018, ended up receiving the certification in November 2018. On the flip side, the timing for the launch of POWERHOUSE didn’t turn out to be advantageous for Real Goods Solar. In line with this, the Zacks Consensus Estimate for Real Goods Solar’s first-quarter revenues is pegged at $15.8 million, indicating a massive surge of 460.6% from the figure reported in the year-ago quarter. Moreover, with legislation like the California 2020 Solar Mandate and a significant amount of written reservations from roofing companies, we expect the company to have secured ample orders and the upcoming results to subsequently reflect We may expect the upcoming quarterly results to reflect the same. Undoubtedly, the commercialization of this product will boost Real Goods Solar’s revenues in the first quarter of 2019. Let’s see how things are shaping up prior to this announcement.įollowing the receipt of the product certification for its POWERHOUSE 3.0 solar shingle system in November 2018 and the California Energy Commission’s approval to market the same in January 2019, Real Goods Solar started manufacturing and commercializing this system. The company missed the Zacks Consensus Estimate in two of the trailing four quarters, the average negative surprise being 46.26%. RGSE is expected to release first-quarter 2019 results soon. I suggest you take a look into a future growth analysis to examine what the market expects for the company moving forward.Real Goods Solar, Inc. As shareholders, you should try and determine whether this strategy is justified for RGSE, and whether the company needs financial flexibility at this point in time. Next Steps:Īre you a shareholder? As RGSE’s revenues are not growing at a fast enough pace, not having any low-cost debt funding may not be optimal for the business. Our analysis shows that RGSE does have enough liquid assets on hand to meet its upcoming liabilities, which lowers our concerns should adverse events arise. We test for RGSE’s ability to meet these needs by comparing its cash and short-term investments with current liabilities. What about its commitments to other stakeholders such as payments to suppliers and employees? During times of unfavourable events, RGSE could be required to liquidate some of its assets to meet these upcoming payments, as cash flow from operations is hindered. Does RGSE’s liquid assets cover its short-term commitments? While its negative growth hardly justifies opting for zero-debt, if the decline sustains, it may find it hard to raise debt at an acceptable cost. RGSE delivered a negative revenue growth of -52.61%. This makes sense only if the company has a competitive edge and is growing fast off its equity capital. Either RGSE does not have access to cheap capital, or it may believe this trade-off is not worth it. However, the trade-off is debtholders’ higher claim on company assets in the event of liquidation and stringent obligations around capital management. Check out our latest analysis for Real Goods Solar Is RGSE growing fast enough to value financial flexibility over lower cost of capital?ĭebt funding can be cheaper than issuing new equity due to lower interest cost on debt. While zero-debt makes the due diligence for potential investors less nerve-racking, it poses a new question: how should they assess the financial strength of such companies? I recommend you look at the following hurdles to assess RGSE’s financial health. However, it also faces higher cost of capital given interest cost is generally lower than equity. Zero-debt allows substantial financial flexibility, especially for small-cap companies like Real Goods Solar Inc ( NASDAQ:RGSE), as the company does not have to adhere to strict debt covenants.
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