Celebrations may be in order for Daqo New Energy Corp. (NYSE:DQ) shareholders, with the analysts delivering a significant upgrade to their statutory estimates for the company. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects. Investor sentiment seems to be improving too, with the share price up 5.9% to US$91.21 over the past 7 days. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.
Following the upgrade, the latest consensus from Daqo New Energy's eight analysts is for revenues of US$1.1b in 2021, which would reflect a sizeable 65% improvement in sales compared to the last 12 months. Per-share earnings are expected to bounce 225% to US$5.91. Previously, the analysts had been modelling revenues of US$946m and earnings per share (EPS) of US$4.60 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$112, suggesting that the forecast performance does not have a long term impact on the company's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Daqo New Energy at US$178 per share, while the most bearish prices it at US$25.60. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Daqo New Energy's past performance and to peers in the same industry. It's clear from the latest estimates that Daqo New Energy's rate of growth is expected to accelerate meaningfully, with the forecast 65% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 21% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 8.3% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Daqo New Energy to grow faster than the wider industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at Daqo New Energy.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Daqo New Energy analysts - going out to 2025, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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