Why LDK Is Poised to Pull Back

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, solar wafer maker LDK Solar (NYSE: LDK  ) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at LDK, and see what CAPS investors are saying about the stock right now.

LDK facts

Headquarters (founded)	Xinyu City, China (2005)
Market Cap	$266.8 million
Industry	Semiconductors
Trailing-12-Month Revenue	$767.1 million
Management	Founder/CEO Xiaofeng Peng President/CEO Xingxue Tong
Return on Capital (average, past 3 years)	(1.4%)
Cash/Debt	$174.1 million / $2.9 billion
Competitors	SunEdison Yingli Green Energy

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 12% of the 1,508 members who have rated LDK believe the stock will underperform the S&P 500 going forward.

Just yesterday, one of those bears, fellow Fool Simon Erickson (TMFInnovator), succinctly summed up the underperform case for our community:

Another failed solar company that is about to go belly up.

LDK got too aggressive in taking out debt right before the downtown (2007-2008). Their revenues have fallen by 70% since then and margins have turned sharply lower. Take note that last year, LDK's net loss more than 10% greater than its TOTAL revenue. That's bad news here, folks.

Subsidies are drying up, and costs per MW are still moving lower. I'm still bullish on concentrated solar as a potential low-cost, regional power source. But solar PV companies (LDK included) are really going to have it rough for the next few years.

TMFFlushDraw wrote a great piece about what it would take for solar companies to get back to profitability.

For LDK, 28% gross margins just aren't going to happen. It's only a matter of time until the lenders demand their money back and the music stops playing.

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