While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.
One company value investors might notice is Daqo New Energy (DQ). DQ is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 6.33, which compares to its industry's average of 17.75. Over the last 12 months, DQ's Forward P/E has been as high as 11.83 and as low as 4.11, with a median of 7.27.
We also note that DQ holds a PEG ratio of 1.26. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. DQ's industry has an average PEG of 1.74 right now. Over the last 12 months, DQ's PEG has been as high as 1.69 and as low as 0.59, with a median of 1.11.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. DQ has a P/S ratio of 0.75. This compares to its industry's average P/S of 1.34.
Value investors will likely look at more than just these metrics, but the above data helps show that Daqo New Energy is likely undervalued currently. And when considering the strength of its earnings outlook, DQ sticks out at as one of the market's strongest value stocks.
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