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Is Daqo New Energy (DQ) a Great Stock for Value Investors?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Daqo New Energy Corp. (DQ - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Daqo New Energy has a trailing twelve months PE ratio of 6.3, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.2. If we focus on the long-term PE trend, Daqo New Energy’s current PE level puts it significantly below its high over the past five years, indicating that it could be a great entry point.
Further, the stock’s PE also compares favorably with the Zacks Basic Materials sector’s trailing twelve months PE ratio, which stands at 17.3. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Daqo New Energy has a forward PE ratio (price relative to this year’s earnings) of just 8.4, so we might say that the forward earnings estimates indicate that the company’s share price will likely appreciate in the near future.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Daqo New Energy has a P/S ratio of about 1.7. This is much lower than the S&P 500 average, which comes in at 3.3 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, Daqo New Energy currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Daqo New Energy a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Daqo New Energy is just 1.2, a level that is lower than the industry average of 2. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 4.1, which is far better than the industry average of 11.4. Clearly, DQ is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Daqo New Energy might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of B and a Momentum Score of F. This gives DQ a Zacks VGM score — or its overarching fundamental grade — of B. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been somewhat encouraging. Both, the current quarter and full year have seen one estimate go higher each, in the past sixty days compared to no downward revisions.
This has had a solid impact on the consensus estimate, as the current quarter consensus estimate has risen by 21.6% in the past two months, while the full year estimate has increased 5.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Given this bullish trend, the stock boasts a Zacks Rank #1 (Strong Buy), which is why we are looking for outperformance from the company in the near term.
Bottom Line
Daqo New Energy is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, this Zacks Rank #1 company enjoys a solid industry rank (top 42% out of more than 250 Zacks industries).
So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Is Daqo New Energy (DQ) a Great Stock for Value Investors?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Daqo New Energy Corp. (DQ - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Daqo New Energy has a trailing twelve months PE ratio of 6.3, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.2. If we focus on the long-term PE trend, Daqo New Energy’s current PE level puts it significantly below its high over the past five years, indicating that it could be a great entry point.
Further, the stock’s PE also compares favorably with the Zacks Basic Materials sector’s trailing twelve months PE ratio, which stands at 17.3. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Daqo New Energy has a forward PE ratio (price relative to this year’s earnings) of just 8.4, so we might say that the forward earnings estimates indicate that the company’s share price will likely appreciate in the near future.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Daqo New Energy has a P/S ratio of about 1.7. This is much lower than the S&P 500 average, which comes in at 3.3 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, Daqo New Energy currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Daqo New Energy a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Daqo New Energy is just 1.2, a level that is lower than the industry average of 2. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 4.1, which is far better than the industry average of 11.4. Clearly, DQ is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Daqo New Energy might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of B and a Momentum Score of F. This gives DQ a Zacks VGM score — or its overarching fundamental grade — of B. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been somewhat encouraging. Both, the current quarter and full year have seen one estimate go higher each, in the past sixty days compared to no downward revisions.
This has had a solid impact on the consensus estimate, as the current quarter consensus estimate has risen by 21.6% in the past two months, while the full year estimate has increased 5.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
DAQO New Energy Corp. Price and Consensus
DAQO New Energy Corp. Price and Consensus | DAQO New Energy Corp. Quote
Given this bullish trend, the stock boasts a Zacks Rank #1 (Strong Buy), which is why we are looking for outperformance from the company in the near term.
Bottom Line
Daqo New Energy is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, this Zacks Rank #1 company enjoys a solid industry rank (top 42% out of more than 250 Zacks industries).
So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>