How do I Choose the Best Solar Energy Stock?

Ron Marr
Ron Marr
Solar power is one area of alternative energy investment.
Solar power is one area of alternative energy investment.

If you are seeking to purchase a solar energy stock simply because you are a supporter of alternative energy sources, then you have already broken one of the major rules of investing. Unless your goal is to lose money, not usually the purpose of investing, it is very unwise to purchase shares simply because you are fond of a particular product or company. As with all stock purchases, putting your hard-earned dollars into any given solar energy stock requires research and analysis.

Inventor Thomas Edison invested in many companies that became successful.
Inventor Thomas Edison invested in many companies that became successful.

Buying stock in any solar energy firm may be viewed as an extremely risky investment. It is true that some advances have been made in solar energy research over the past decade, but there have been no monumental breakthroughs that permit this emerging field to compete with traditional energy resources and firms. A lack of advanced technology in systems and storage batteries, the absence of a widespread distribution system, and a high cost per kilowatt-hour show that solar energy has not yet come close to becoming a viable, cost effective power source.

As is true with all stock investments, make sure to study a solar company’s annual reports.
As is true with all stock investments, make sure to study a solar company’s annual reports.

If you wish to invest in a solar energy stock, your best and safest bet would be to invest in traditional energy companies that are engaging in solar energy research. While individuals do occasionally invent breakthrough technologies in the garage or workshop – Thomas Edison being a prime example – investing in fledgling companies that strike it rich is a matter of luck. You would be far more likely to show an adequate return on your investment by reviewing profitable, major corporations and placing your funds with those who strive to make inroads into solar technology.

As is true with all stock investments, study a company’s annual reports and discover the answers to several pertinent questions. You should look at earnings growth, and the reasons behind any substantial gains or losses that the firm has experienced. Pay attention to dividend payments, whether or not the company is trying to buy back its own shares, and the price to earnings ratio. Consider the industry where you wish to invest as a whole. Is it on an upward trend, or is it being left behind in the wake of revolutionary science, manufacturing techniques, and products.

There is much talk of the future potential for solar energy, however talk and potential mean little until they transform into reality and action. You should proceed warily before investing in a solar energy stock, as it is very likely that many of the new companies in this market will come and go over the next few years or decades. Solar energy may eventually emerge as a major player in the electrical utility sector, but there is a long road ahead.

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    • Solar power is one area of alternative energy investment.
      Solar power is one area of alternative energy investment.
    • Inventor Thomas Edison invested in many companies that became successful.
      Inventor Thomas Edison invested in many companies that became successful.
    • As is true with all stock investments, make sure to study a solar company’s annual reports.
      As is true with all stock investments, make sure to study a solar company’s annual reports.