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Is Daqo New Energy (DQ) a Great Value Stock Right Now?

Zacks Equity Research

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company value investors might notice is Daqo New Energy (DQ). DQ is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 6.68. This compares to its industry's average Forward P/E of 16.98. Over the past year, DQ's Forward P/E has been as high as 11.83 and as low as 4.11, with a median of 6.55.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. DQ has a P/S ratio of 0.82. This compares to its industry's average P/S of 1.25.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Daqo New Energy is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, DQ feels like a great value stock at the moment.


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Zacks Investment Research