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DQ vs. VSM: Which Stock Is the Better Value Option?

Zacks Equity Research

Investors interested in Chemical - Specialty stocks are likely familiar with Daqo New Energy (DQ) and Versum Materials (VSM). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, Daqo New Energy has a Zacks Rank of #2 (Buy), while Versum Materials has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that DQ likely has seen a stronger improvement to its earnings outlook than VSM has recently. But this is just one factor that value investors are interested in.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

DQ currently has a forward P/E ratio of 6.65, while VSM has a forward P/E of 12.12. We also note that DQ has a PEG ratio of 0.23. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. VSM currently has a PEG ratio of 0.93.

Another notable valuation metric for DQ is its P/B ratio of 0.55. 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, VSM has a P/B of 15.18.

These are just a few of the metrics contributing to DQ's Value grade of A and VSM's Value grade of C.

DQ stands above VSM 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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