Investors looking for stocks in the Chemical - Specialty sector might want to consider either Daqo New Energy (DQ) or Quaker Chemical (KWR). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.
Right now, Daqo New Energy is sporting a Zacks Rank of #2 (Buy), while Quaker Chemical has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that DQ likely has seen a stronger improvement to its earnings outlook than KWR has recently. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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 7.89, while KWR has a forward P/E of 28.64. We also note that DQ has a PEG ratio of 0.27. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. KWR currently has a PEG ratio of 2.60.
Another notable valuation metric for DQ is its P/B ratio of 0.65. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, KWR has a P/B of 6.35.
These metrics, and several others, help DQ earn a Value grade of A, while KWR has been given a Value grade of D.
DQ is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that DQ is likely the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
DAQO New Energy Corp. (DQ) : Free Stock Analysis Report
Quaker Chemical Corporation (KWR) : Free Stock Analysis Report
To read this article on Zacks.com click here.