Looking at year-to-date returns of all five (two of them only started trading recently), it is easy to see that Trina Solar is the market's darling. Trina Solar, which started trading only in late December of last year, is up 135% this year. Of course, the Energizer bunny is going strong with a 20% gain year-to-date.

This week I'll take a closer look at the solar energy companies. Next week I'll review the other three in Part II.

• Suntech Power Holdings Co., Ltd (NYSE:STP) --

Suntech is a solar energy company based in China. It designs, develops, manufactures and markets a variety of photovoltaic (PV) cells and modules. Suntech announced its IPO of ADS in December 2005 after three and a half years of operation. Just last week, the company reported fourth-quarter profit that more than tripled compared to a year earlier, beating analysts expectations on EPS but not on revenue (despite those surging nearly 150%). STP shares declined as the company said it expected margins to decline in 2007 due to higher silicon costs.

While STP stock is up a weak 3.8% year-to-date, it has beat the overall market. Over the past 52 weeks, STP has gained 3.2%, underperforming the market, while exhibiting high volatility. Over the past year, STP stock reached a high of $41.50 and a low of $21.40. Suntech has a market capitalization of $5.28 billion. The company's profitability ratios and growth rates compare favorably to industry averages, and analysts on average rate the company overweight with a $37.50 target price. STP trades at a trailing P/E of 52x and a forward P/E of 34x.

Suntech claims its objective is to become the "lowest cost per watt" provider of PV solutions to customers worldwide. The company operates worldwide and its penetration in the U.S. market has lately increased, with 2007 sales expected to triple. Most of its revenue still comes from Europe and the company recently established Suntech Europe based out of London.

On Friday, Goldman Sachs downgraded Suntech from Buy to Neutral and the shares took a hit, losing 2.8% of their value. While aggressive expansion plans are usually accepted with open arms, the Goldman analyst is worried about raw-material (silicon) supply. It may not be enough and not low-priced enough.

Suntech promises to have more efficient silicon solar cells and increased production. Combine that with growing demand and the company seems solid and poised for more growth.

• Trina Solar Ltd. (NYSE:TSL) --

Trina Solar is another solar power company based in China. It manufactures solar power products and produces standard solar modules ranging from 160 watts to 185 watts in power output. It operates mostly in Europe, but also in other markets worldwide. Trina Solar ADS debuted in late December on the NYSE. On February 15, Trina reported fourth-quarter results that beat analysts' estimates. Shares dropped, however, due to continued decreasing margins.

TSL stock is up over 135% year-to-date. It only traded a few days in 2006, but since its IPO, TSL shares have gained over 119% setting a low of $17.05 in early January and a high of $50.94 on February 26. Trina Solar has a market cap of $944 million. It is hard to compare a company just out of its IPO, but at a quick glance it seems that while its growth rates are higher than the industry's, it has profitability issues. Two analysts rate TSL a Buy and two Outperform. TSL trades at a trailing P/E of 49x.

Recently, the company announced a strategic cooperation agreement with Q-Cells, one of the largest solar cell manufacturers in the world. The company also entered into a long-term supply agreement for polysilicon with DC Chemical. Finally, the company also plans to increase its power supply in order to support the expansion of its production capacity. The strong top-line growth will be dampened by the high cost of silicon. Trina vowed to cut costs to compensate. Trina will try to enter the U.S. market in 2007.

So...

There has been a margin squeeze in the solar industry as silicon prices have shot up due to a worldwide shortage of silicon since late 2005. This shortage is predicted to end by 2008-2010. At the same time, demand for solar power is increasing. For example, California plans to install at least 3,000 megawatts of solar power by 2020. This could mean that even if the shortage eases, demand might still outstrip the higher supply. While usually demand outstripping supply is music to the ears of investors, in this case it wouldn't necessarily be a good thing as the reason customers want solar energy (other than their obvious green souls) is that it is cheaper. Manufacturers, therefore, can't hike prices too much, if at all, while still having to deal with higher silicon prices.

Since all these companies rely on raw material to different degrees, the question becomes: which one has the better strategy and is valued more attractively? Both Suntech and Trina seem a little expensive, but their triple-digit growth rates could support such high valuation levels. Trina might still have some energy left in it for another run.

Today, Banc of America initiated coverage of solar stocks: Our two missing stocks, Sunpower and First Solar were rated as Buy, while Suntech was rated as Neutral with a $38 target price. Energy Conversion Devices Inc. (NASDAQ: ENER) was also started as Neutral, but Evergreen Solar was a Sell. Am Tech/JSA Research on the other hand started First Solar as a Sell and Suntech as a Buy with a $46 target price.

In general, solar power stocks are more volatile and risky. Indeed, growth rates have been considerable but the industry doesn't have a high entrance barrier and the number of players could substantially increase. While I'm not in love with any of the two companies my stock screener returned, I think it may not be too late to jump on the Trina bandwagon. Suntech could prove a long-term solid player as well.

Don't forget to check out Part II of this post.