SolarEdge (NASDAQ:SEDG) shares rallied substantially by 151% in the twelve months – the move was supported by a strong growth in financial numbers and smart business expansion strategies. SEDG stock price rose more than 24% in Thursday trading after the company topped revenue and earnings expectations for the fourth quarter.
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Strong Fourth Quarter Results For SolarEdge
It has beaten the consensus revenue estimate by $8.59 million, while earnings exceed the analysts estimate by$ 0.20 per share. The company generated a record revenue of $189 million in Q4, up 70% from the previous year period.
SolarEdge revenues grew in each of the geographies, and the company has also expanded its manufacturing capacity to capitalize on increasing demand.
Moreover, the company’s strategy of investing in high margin products helped to enlarge its gross margin, while cost-cutting strategies improved its operating margins.
SEDG gross margin rose to 37.5% in Q4, considerably higher from 34.9% in Q3. The strategies to support the bottom line allowed SolarEdge to generate Non-GAAP net income of $41.2 million, representing a growth of 31% from $31.5 million in the prior quarter.
The CEO said, “We expanded our gross margin by keeping our ASP stable, continuing our cost reduction initiatives and increased profitability and cash flow generation while maintaining and even increasing our investments in R&D and customer support and growing our geographic footprint.”
SolarEdge now expects its revenues in the range of $210 million in the first quarter, while gross margin is expected to hover around 38%.
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The Cash Position is Sufficient
The cash position remains strong enough to support its expansion strategies. Its operating cash flow was standing close to $136 million in FY2017, when capital requirements were only around $86 million. Thus, the company was left with significant free cash flow for investment in growth opportunities.
Stronger internal cash flows and record revenue continues to support its cash position. At the end of the latest quarter, its cash, cash equivalents, restricted cash totaled around $345.1 million, relative to $304.7 million in the prior year period.
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