SolarEdge’s 17.6% return over the past six months has outpaced the S&P 500 by 7.5%, and its stock price has climbed to $33.91 per share. This run-up might have investors contemplating their next move.

Is there a buying opportunity in SolarEdge, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Do We Think SolarEdge Will Underperform?

We’re happy investors have made money, but we're cautious about SolarEdge. Here are three reasons there are better opportunities than SEDG and a stock we'd rather own.

1. Decline in Megawatts Shipped Points to Weak Demand

Revenue growth can be broken down into changes in price and volume (for companies like SolarEdge, our preferred volume metric is megawatts shipped). While both are important, the latter is the most critical to analyze because prices have a ceiling.

SolarEdge’s megawatts shipped came in at 1,471 in the latest quarter, and over the last two years, averaged 20.7% year-on-year declines. This performance was underwhelming and implies there may be increasing competition or market saturation. It also suggests SolarEdge might have to lower prices or invest in product improvements to grow, factors that can hinder near-term profitability.

2. New Investments Fail to Bear Fruit as ROIC Declines

A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, SolarEdge’s ROIC has decreased significantly over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

3. Restricted Access to Capital Increases Risk

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

SolarEdge posted negative $378.7 million of EBITDA over the last 12 months, and its $664.9 million of debt exceeds the $498.6 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

We implore our readers to tread carefully because credit agencies could downgrade SolarEdge if its unprofitable ways continue, making incremental borrowing more expensive and restricting growth prospects. The company could also be backed into a corner if the market turns unexpectedly. We hope SolarEdge can improve its profitability and remain cautious until then.

Final Judgment

SolarEdge falls short of our quality standards. With its shares topping the market in recent months, the stock trades at $33.91 per share (or a forward price-to-sales ratio of 1.5×). The market typically values companies like SolarEdge based on their anticipated profits for the next 12 months, but it expects the business to lose money. We also think the upside isn’t great compared to the potential downside here - there are more exciting stocks to buy. We’d recommend looking at a safe-and-steady industrials business benefiting from an upgrade cycle.

Stocks We Like More Than SolarEdge

Check out the high-quality names we’ve flagged in our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.