Investors interested in stocks from the Chemical - Specialty sector have probably already heard of Daqo New Energy (DQ) and Livent (LTHM). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Daqo New Energy and Livent are sporting Zacks Ranks of #1 (Strong Buy) and #4 (Sell), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that DQ has an improving earnings outlook. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
DQ currently has a forward P/E ratio of 6.84, while LTHM has a forward P/E of 22.46. We also note that DQ has a PEG ratio of 0.24. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. LTHM currently has a PEG ratio of 7.49.
Another notable valuation metric for DQ is its P/B ratio of 1.21. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, LTHM has a P/B of 2.31.
Based on these metrics and many more, DQ holds a Value grade of A, while LTHM has a Value grade of F.
DQ stands above LTHM thanks to its solid earnings outlook, and based on these valuation figures, we also feel that DQ is the superior value option right now.
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DAQO New Energy Corp. (DQ) : Free Stock Analysis Report
Livent Corporation (LTHM) : Free Stock Analysis Report
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