Can DQ's Great Earnings and Ratios Propel them to ATH's

Today we are looking at Daqo New Energy Corp. (NYSE: DQ), to determine if the DQ stock is a good buy. We will look at DQ financial ratios, analyst ratings, and valuation to determine a DQ stock forecast and price. What does Daqo Do? Daqo New Energy Corp., together with its subsidiaries, manufactures and sells polysilicon to photovoltaic product manufactures in the People's Republic of China. Its products are used in ingots, wafers, cells, and modules for solar power solutions. The company was formerly known as Mega Stand International Limited and changed its name to Daqo New Energy Corp. in August 2009. Daqo New Energy Corp. was founded in 2006 and is based in Shanghai, the People's Republic of China. Laying out Information for a DQ Stock Forecast DQ Stock Competitors In order to undergo a comparable analysis (to determine DQ stocks value), we need to first outline who DQ's competitors are. These competitors need to be publicly listed, have valid financial metrics/multiples, operate in a similar manner to DQ, and have a market cap similar to DQ (if possible). By keeping this in mind, I found the following list of companies to be some of DQ stocks closest competitors: FSLR, LSCC, SYNA, and SKWS DQ Stock Earnings Analysis of Daqo New Energy Corp. Stock Earnings and Financial Ratios DQ Earnings (Yearly): DQ Revenues: In FY 2021, DQ experienced a yearly increase in revenues of $1B (or 148.49%) resulting in a total revenue figure of $1.68B. DQ Cost of Revenues: In FY 2021, DQ experienced a yearly increase in their cost of revenues of $139.97M (31.7%), resulting in a total revenue figure of $581.59M. Since the increase (of 31.7%), in DQ's cost of revenue was lesser (by -116.79%) than the increase (of 148.49%) in DQ's revenues, we should expect that DQ experienced an increase (roughly 116.79%) in their FY gross profits. DQ Gross Profit: In FY 2021, DQ experienced a yearly increase in their gross profit of $863.22M (or 368.91%) resulting in a total gross profit of $1.1B. This increase is somwehat consistent  with our conclusion from the comparison of revenues and cost of revenues between FY and FY. DQ EBITDA: In FY 2021, DQ experienced a yearly increase in their EBITDA of $686.81M (or 271.79%) resulting in a total EBITDA of $939.51M. This increase (of 271.79%) stems from the fact that DQ experienced a increase in their gross profits of 368.91% (as we saw in the previous bullet point). DQ Net Income: In FY 2021, DQ experienced a yearly increase in their net income of $627.02M (or 485.33%) resulting in a total net income of $756.22M. DQ EPS: As a result of DQ's increase in net income of $627.02M, DQ's EPS also increased (by $8.42) from $1.82 in FY 2020 to $10.24 in FY 2021 Overall, it seems as though DQ had a break-out year in terms of their earnings exploding, and starting to really take shape. This was reflected in their stock price as it jumped over 100% in the first 2 months of 2021. Every single metirc covered in this analysis grew by over 100%, except their cost of revenues (+31.7%), which is absolutely brilliant for their stock. We now know that DQ reported fantastic earnings in 2021, however, have they been able to continue this impressive performance into 2022. Let's find out by examining the Q1 2022 DQ Earnings Report. DQ Earnings (Quarterly): DQ Revenues: In Q1 2022, DQ experienced a quarterly increase in revenues of $884.78M (or 223.68%) resulting in a total revenue figure of $1.28B. DQ Cost of Revenues: In Q1 2022, DQ experienced a quarterly increase in their cost of revenues of $311.05M (199.75%), resulting in a total revenue figure of $466.77M. Since the increase (of 199.75%), in DQ's cost of revenue was lesser (by -23.93%) than the increase (of 223.68%) in DQ's revenues, we should expect that DQ experienced an increase  in their Q1 gross profits. DQ Gross Profit: In Q1 2022, DQ experienced a quarterly increase in their gross profit of $573.73M (or 239.22%) resulting in a total gross profit of $813.56M. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between Q1 2022 and Q4 2021. DQ EBITDA: In Q1 2022, DQ experienced a quarterly increase in their EBITDA of $473.55M (or 244.51%) resulting in a total EBITDA of $667.22M. This increase (of 244.51%) stems from the fact that DQ experienced a increase in their gross profits of 239.22% (as we saw in the previous bullet point). DQ Net Income: In Q1 2022, DQ experienced a quarterly increase in their net income of $387.27M (or 260.66%) resulting in a total net income of $535.84M. DQ EPS: As a result of DQ's increase in net income of $387.27M, DQ's EPS also increased (by $5.17) from $2 in Q4 2021 to $7.17 in Q1 2022 Overall, it seems as though DQ was able to continue their steller financial performances  as many of their financial metrics grew, most notably their EPS (by $5.17), as well as their net income (by $387.27M), and other metrics (as you can tell from the above bullet points). However despite their massive growth, DQ stock missed their EPS estimate by $0.08 (or 1.13%), as they reported an EPS of $6.99 for Q1 2022 (compared to their estimated EPS of $7.07). Is DQ's Mild Share Dilution a Problem? As part of their Q1 2022 earnings release, DQ stated that they currently have 74.71M Shares Outstanding (weighted average), which is up 333.12k shares (from 74.38M shares outstanding in Q4 2021). This represents a less than 1% share dilution (0.44%) which is not grounds for concern. Furthermore, DQ stock has up to 2.34M of shares that they can issue (thereby diluting DQ's stock). This maximum dilution for the period would only have a dilutionary effect on DQ of 2.57%. This on the other hand is something that investors should be weary of. Investors should not necessarily be concerned by this, but they should be aware of this, and not be surprised if these shares get issued. What are Analyst Rating DQ Stock as? Here is the current spread of DQ stock ratings. In total there are 20 DQ stock ratings, which fall in the following categories. 12 Buys 7 Holds 1 Sells Analyst Ratings have provided relatively strong indicators of future price movement, which is why they are used to determine if DQ stock is a buy or sell. Overall, the majority of analyst ratings are in favour of a "buy" for the DQ stock. This is bullish as analysts are assuming that the DQ stock is currently undervalued. Low and Behold, My DQ Stock Prediction DQ Price Forecast Using a Comparable Analysis Price to Book (P/B): DQ's current P/B ratio is 8.4, compared to the average P/B ratio of DQ's peers being 6.79. This implies that DQ is undervalued and their share price should change by a factor of -19.17% to be at fair value (based on DQ's P/B compared to the P/B of their peers). Price to Equity (P/E): DQ stock P/E ratio is currently 12.56, compared to the average P/E ratio of DQ's peers being 31.11. This implies that DQ is overvalued and their share price should change by a factor of 147.72% to be at fair value (based on DQ's P/E compared to the P/E of their peers). Overall, DQ stock is overvalued and needs to experience a change in stock price of (an average of) +64.28% to be considered “at fair value”. This would represent a DQ Price Forecast of $103.96 Is DQ a good stock to buy right now? Due to the fact that my DQ stock forecast implies that DQ is undervalued and needs to experience a price change of +64.28% in order to be at their fair value, DQ's steller earnings history and growth, not a ton of potential dilution, and analysts overwhelmingly rating DQ as a "buy", I have concluded that DQ is a great candidate for a "buy" which could reach $100/share. The only thing that is "worrying" is that the DQ stock is already up 68% over the past month. 

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Can DQ's Great Earnings and Ratios Propel them to ATH's

Jun 10, 2022

bullish

general Analysis

[6 min Read]

blog post cover photo

Today we are looking at Daqo New Energy Corp. (NYSE: DQ), to determine if the DQ stock is a good buy. We will look at DQ financial ratios, analyst ratings, and valuation to determine a DQ stock forecast and price.

What does Daqo Do?

Daqo New Energy Corp., together with its subsidiaries, manufactures and sells polysilicon to photovoltaic product manufactures in the People's Republic of China. Its products are used in ingots, wafers, cells, and modules for solar power solutions. The company was formerly known as Mega Stand International Limited and changed its name to Daqo New Energy Corp. in August 2009. Daqo New Energy Corp. was founded in 2006 and is based in Shanghai, the People's Republic of China.

Laying out Information for a DQ Stock Forecast

DQ Stock Competitors

In order to undergo a comparable analysis (to determine DQ stocks value), we need to first outline who DQ's competitors are.

These competitors need to be publicly listed, have valid financial metrics/multiples, operate in a similar manner to DQ, and have a market cap similar to DQ (if possible).

By keeping this in mind, I found the following list of companies to be some of DQ stocks closest competitors:

FSLR, LSCC, SYNA, and SKWS

DQ Stock Earnings

Analysis of Daqo New Energy Corp. Stock Earnings and Financial Ratios

DQ Earnings (Yearly):

  • DQ Revenues: In FY 2021, DQ experienced a yearly increase in revenues of $1B (or 148.49%) resulting in a total revenue figure of $1.68B.
  • DQ Cost of Revenues: In FY 2021, DQ experienced a yearly increase in their cost of revenues of $139.97M (31.7%), resulting in a total revenue figure of $581.59M. Since the increase (of 31.7%), in DQ's cost of revenue was lesser (by -116.79%) than the increase (of 148.49%) in DQ's revenues, we should expect that DQ experienced an increase (roughly 116.79%) in their FY gross profits.
  • DQ Gross Profit: In FY 2021, DQ experienced a yearly increase in their gross profit of $863.22M (or 368.91%) resulting in a total gross profit of $1.1B. This increase is somwehat consistent with our conclusion from the comparison of revenues and cost of revenues between FY and FY.
  • DQ EBITDA: In FY 2021, DQ experienced a yearly increase in their EBITDA of $686.81M (or 271.79%) resulting in a total EBITDA of $939.51M. This increase (of 271.79%) stems from the fact that DQ experienced a increase in their gross profits of 368.91% (as we saw in the previous bullet point).
  • DQ Net Income: In FY 2021, DQ experienced a yearly increase in their net income of $627.02M (or 485.33%) resulting in a total net income of $756.22M.
  • DQ EPS: As a result of DQ's increase in net income of $627.02M, DQ's EPS also increased (by $8.42) from $1.82 in FY 2020 to $10.24 in FY 2021

Overall, it seems as though DQ had a break-out year in terms of their earnings exploding, and starting to really take shape. This was reflected in their stock price as it jumped over 100% in the first 2 months of 2021. Every single metirc covered in this analysis grew by over 100%, except their cost of revenues (+31.7%), which is absolutely brilliant for their stock. We now know that DQ reported fantastic earnings in 2021, however, have they been able to continue this impressive performance into 2022. Let's find out by examining the Q1 2022 DQ Earnings Report.

DQ Earnings (Quarterly):

  • DQ Revenues: In Q1 2022, DQ experienced a quarterly increase in revenues of $884.78M (or 223.68%) resulting in a total revenue figure of $1.28B.
  • DQ Cost of Revenues: In Q1 2022, DQ experienced a quarterly increase in their cost of revenues of $311.05M (199.75%), resulting in a total revenue figure of $466.77M. Since the increase (of 199.75%), in DQ's cost of revenue was lesser (by -23.93%) than the increase (of 223.68%) in DQ's revenues, we should expect that DQ experienced an increase in their Q1 gross profits.
  • DQ Gross Profit: In Q1 2022, DQ experienced a quarterly increase in their gross profit of $573.73M (or 239.22%) resulting in a total gross profit of $813.56M. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between Q1 2022 and Q4 2021.
  • DQ EBITDA: In Q1 2022, DQ experienced a quarterly increase in their EBITDA of $473.55M (or 244.51%) resulting in a total EBITDA of $667.22M. This increase (of 244.51%) stems from the fact that DQ experienced a increase in their gross profits of 239.22% (as we saw in the previous bullet point).
  • DQ Net Income: In Q1 2022, DQ experienced a quarterly increase in their net income of $387.27M (or 260.66%) resulting in a total net income of $535.84M.
  • DQ EPS: As a result of DQ's increase in net income of $387.27M, DQ's EPS also increased (by $5.17) from $2 in Q4 2021 to $7.17 in Q1 2022

Overall, it seems as though DQ was able to continue their steller financial performances as many of their financial metrics grew, most notably their EPS (by $5.17), as well as their net income (by $387.27M), and other metrics (as you can tell from the above bullet points).

However despite their massive growth, DQ stock missed their EPS estimate by $0.08 (or 1.13%), as they reported an EPS of $6.99 for Q1 2022 (compared to their estimated EPS of $7.07).

Is DQ's Mild Share Dilution a Problem?

As part of their Q1 2022 earnings release, DQ stated that they currently have 74.71M Shares Outstanding (weighted average), which is up 333.12k shares (from 74.38M shares outstanding in Q4 2021). This represents a less than 1% share dilution (0.44%) which is not grounds for concern.

Furthermore, DQ stock has up to 2.34M of shares that they can issue (thereby diluting DQ's stock). This maximum dilution for the period would only have a dilutionary effect on DQ of 2.57%. This on the other hand is something that investors should be weary of. Investors should not necessarily be concerned by this, but they should be aware of this, and not be surprised if these shares get issued.

What are Analyst Rating DQ Stock as?

Here is the current spread of DQ stock ratings. In total there are 20 DQ stock ratings, which fall in the following categories.

  • 12 Buys
  • 7 Holds
  • 1 Sells

Analyst Ratings have provided relatively strong indicators of future price movement, which is why they are used to determine if DQ stock is a buy or sell. Overall, the majority of analyst ratings are in favour of a "buy" for the DQ stock. This is bullish as analysts are assuming that the DQ stock is currently undervalued.

Low and Behold, My DQ Stock Prediction

DQ Price Forecast Using a Comparable Analysis

  1. Price to Book (P/B): DQ's current P/B ratio is 8.4, compared to the average P/B ratio of DQ's peers being 6.79. This implies that DQ is undervalued and their share price should change by a factor of -19.17% to be at fair value (based on DQ's P/B compared to the P/B of their peers).
  2. Price to Equity (P/E): DQ stock P/E ratio is currently 12.56, compared to the average P/E ratio of DQ's peers being 31.11. This implies that DQ is overvalued and their share price should change by a factor of 147.72% to be at fair value (based on DQ's P/E compared to the P/E of their peers).

Overall, DQ stock is overvalued and needs to experience a change in stock price of (an average of) +64.28% to be considered “at fair value”. This would represent a DQ Price Forecast of $103.96

Is DQ a good stock to buy right now?

Due to the fact that my DQ stock forecast implies that DQ is undervalued and needs to experience a price change of +64.28% in order to be at their fair value, DQ's steller earnings history and growth, not a ton of potential dilution, and analysts overwhelmingly rating DQ as a "buy", I have concluded that DQ is a great candidate for a "buy" which could reach $100/share. The only thing that is "worrying" is that the DQ stock is already up 68% over the past month.

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DQ

Daqo New Energy Corp.

70.80

0.11
0.16%

Return

12.31%
Change % Since Posting
7.76
Change Since Posting
63.04
Price When Posted

Metrics

69.34
Target Price
8/ 10
Confidence
2-6 Months
Timeframe
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Earnings Release
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News
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