Unveiling Daqo New Energy (DQ)'s Value: Is It Really Priced Right? A Comprehensive Guide
Daqo New Energy Corp (NYSE:DQ), despite a daily loss of 3.83% and a 3-month loss of 28.68%, boasts an impressive Earnings Per Share (EPS) (EPS) of 13.75. But is the stock significantly undervalued? This article delves into the valuation analysis of Daqo New Energy, providing insights to help investors make informed decisions.
Company Overview
Daqo New Energy Corp is a leading polysilicon manufacturer based in China. The company specializes in the production and sale of high-purity polysilicon to photovoltaic product manufacturers. These manufacturers process polysilicon into ingots, cells, and modules for solar power solutions. Daqo New Energy's revenues are primarily derived from the People's Republic of China.
Despite its current stock price of $30.41, the GF Value, an estimation of fair value, stands at $86.11, suggesting that the stock might be significantly undervalued.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is derived from historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded.
According to GuruFocus Value calculation, Daqo New Energy (NYSE:DQ) is estimated to be significantly undervalued. With a current price of $30.41 per share and a market cap of $2.30 billion, Daqo New Energy stock appears to be trading below its fair value. This suggests that the long-term return of its stock is likely to be much higher than its business growth.
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Assessing Daqo New Energy's Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before investing. Daqo New Energy has a cash-to-debt ratio of 10000, ranking better than 99.89% of 902 companies in the Semiconductors industry. This suggests a strong balance sheet and impressive financial strength.
Profitability and Growth
Consistent profitability over the long term often indicates a safer investment. Daqo New Energy has been profitable 9 out of the past 10 years. With a revenue of $3.40 billion and an Earnings Per Share (EPS) of $13.75 over the past twelve months, its operating margin is 58.12%, ranking better than 99.26% of 947 companies in the Semiconductors industry.
Furthermore, growth is a crucial factor in a company's valuation. Daqo New Energy's 3-year average annual revenue growth rate is 128.5%, ranking better than 98.62% of 871 companies in the Semiconductors industry. The 3-year average EBITDA growth rate is 292%, ranking better than 99.48% of 773 companies in the Semiconductors industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) can also provide insights into its profitability. Daqo New Energy's ROIC is 44.66 while its WACC came in at 5.55, indicating that the company is likely creating value for its shareholders.
Conclusion
In conclusion, Daqo New Energy (NYSE:DQ) appears to be significantly undervalued. The company boasts strong financial condition, impressive profitability, and robust growth. For more details about Daqo New Energy stock, check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
