Daqo New Energy Corp. (NYSE:DQ), which is in the semiconductor business, and is based in China, received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$77.64 at one point, and dropping to the lows of US$42.83. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Daqo New Energy's current trading price of US$46.69 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Daqo New Energy’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Daqo New Energy still cheap?
Great news for investors – Daqo New Energy is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Daqo New Energy’s ratio of 22.44x is below its peer average of 29.6x, which indicates the stock is trading at a lower price compared to the Semiconductor industry. What’s more interesting is that, Daqo New Energy’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Daqo New Energy?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to more than double over the next couple of years, the future seems bright for Daqo New Energy. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? Since DQ is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on DQ for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy DQ. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Daqo New Energy. You can find everything you need to know about Daqo New Energy in the latest infographic research report. If you are no longer interested in Daqo New Energy, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.