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Is Daqo New Energy (DQ) Stock Undervalued 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.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

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 a Value grade of A. The stock is trading with a P/E ratio of 8.20, which compares to its industry's average of 17.56. Over the last 12 months, DQ's Forward P/E has been as high as 10.74 and as low as 4.11, with a median of 6.53.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. 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 1.17. This compares to its industry's average P/S of 1.28.

Finally, we should also recognize that DQ has a P/CF ratio of 4.98. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 18.98. Over the past year, DQ's P/CF has been as high as 5.48 and as low as 2.40, with a median of 3.76.

These are just a handful of the figures considered in Daqo New Energy's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that DQ is an impressive value stock right now.


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Zacks Investment Research