First Solar, Inc. (FSLR) is a key player in the renewable energy sector, specializing in the design and manufacturing of solar photovoltaic (PV) modules. The company's business model is straightforward: they produce advanced thin-film solar panels and sell them primarily to large-scale power plant developers and operators.

The Business Model (How They Make Money)

First Solar's core economic engine is driven by the global demand for clean energy and their ability to efficiently manufacture high-performance solar modules. They differentiate themselves through their proprietary cadmium telluride (CdTe) thin-film technology, which they claim offers advantages in certain applications and environmental conditions.

Their main revenue stream comes from the sale of these solar modules. The company has been actively expanding its manufacturing footprint, particularly in the United States, to meet growing demand and benefit from government incentives like the Section 45X Advanced Manufacturing Production Tax Credits.

For the full year 2025, First Solar reported net sales (revenue) of $5.2 billion. Looking ahead, the company has provided guidance for 2026, projecting net sales to be between $4.9 billion and $5.2 billion. As of June 30, 2026, First Solar had a substantial contracted sales backlog of 45.1 gigawatts (GW), with deliveries scheduled through 2030, indicating strong future demand for their products.

The Metrics That Matter Most

For a manufacturing company like First Solar, which is heavily investing in production capacity and operates in a competitive, technology-driven industry, the following performance metrics are particularly insightful:

1. Revenue: This metric simply tells you the total amount of money the company brings in from selling its solar modules. For First Solar, consistent growth in revenue indicates increasing demand for their products and successful execution of their sales strategy. Given their significant manufacturing expansion and backlog, monitoring revenue helps confirm that their production is translating into actual sales and market penetration. For the full year 2025, First Solar's revenue was $5.2 billion. The company anticipates 2026 net sales to be in the range of $4.9 billion to $5.2 billion.

2. Gross Margin: This is the profit a company makes from selling its products after subtracting the direct costs of making those products (like materials and factory labor). For First Solar, a healthy gross margin shows how efficiently they are manufacturing their solar modules and how well they are pricing them. A higher gross margin means more money is left over to cover other business expenses and contribute to overall profit. In 2025, First Solar achieved a gross margin of approximately 40.77% (calculated from gross profit of $2.12 billion and revenue of $5.2 billion). For the second quarter of 2026, their gross margin improved to approximately 57.08% (calculated from gross profit of $605 million and net sales of $1.06 billion). The company's 2026 guidance projects gross profit between $2.4 billion and $2.6 billion.

3. CapEx (Capital Expenditures): This refers to the money a company spends to buy, maintain, or improve its physical assets, such as factories, machinery, and equipment. For First Solar, CapEx is crucial because they are a manufacturer that needs to build and upgrade production facilities to increase output and stay competitive. High CapEx often signals investment in future growth, but it's important to ensure these investments eventually lead to higher revenue and profits. In 2025, First Solar's capital expenditures were $869.9 million. For the full year 2026, the company expects capital expenditures to be between $800 million and $1.0 billion, reflecting ongoing investments in their manufacturing capacity, including facilities in South Carolina.

4. Return on Capital Employed (ROCE): This metric shows how effectively a company is using all the money invested in its business (both from shareholders and lenders) to generate profits. For a capital-intensive manufacturer like First Solar, ROCE is vital because it reveals whether their significant investments in factories and equipment are actually paying off. A higher ROCE indicates that the company is efficiently turning its capital into operating income. For 2025, First Solar's Return on Capital Employed was approximately 14.43% (calculated from operating income of $1.597 billion and capital employed of $11.067 billion).

How to Value This Company

The ONE most relevant valuation metric for First Solar, given its capital-intensive manufacturing business and significant investments in growth, is EV/EBITDA (Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization).

Here's why:

• What it is: Enterprise Value (EV) is like the total sticker price of the company, including its stock market value, plus its debt, minus any cash it has. EBITDA is a measure of the company's operating earnings before accounting for non-cash expenses like depreciation (the cost of assets wearing out) and amortization, as well as interest payments and taxes.
• Why it's best for First Solar: For a company that builds and operates large factories, depreciation can be a very big expense, making traditional P/E (Price-to-Earnings) ratios less useful for comparison. EV/EBITDA helps by looking at the company's value relative to its core operating profitability before these large non-cash charges and before the impact of its debt structure. Since First Solar is investing heavily in new facilities (CapEx), it's important to see how much operating profit they generate from their entire business, including the impact of debt used for these investments. This metric allows investors to compare First Solar to other capital-intensive companies in the renewable energy or manufacturing sectors more fairly, regardless of their specific debt levels or accounting for asset wear and tear.
• How to use it: To figure out if First Solar's stock is cheap or expensive, you would compare its current EV/EBITDA ratio to its own historical average, as well as to the EV/EBITDA ratios of similar solar manufacturers or industrial companies. If First Solar's ratio is lower than its historical average or its peers, it might suggest the stock is undervalued, assuming its future growth prospects remain strong. For 2025, First Solar's Adjusted EBITDA was $2.065 billion. The company's 2026 guidance for Adjusted EBITDA is between $2.6 billion and $2.8 billion.