Reassessing Daqo New Energy (DQ) After Volatile Solar Sentiment And Mixed Valuation Signals

• If you are wondering whether Daqo New Energy offers good value at its current share price, you are not alone. This article will walk through what the numbers are and what they might mean for you as an investor.
• The stock has seen a mixed return profile, with a 1.6% decline over the last 7 days, a 21.2% decline over the last 30 days, a 15.1% decline year to date, a 32.0% gain over the last year, a 46.8% decline over 3 years, and a 74.0% decline over 5 years.
• Recent news flow around Daqo New Energy has focused on its position in the solar materials supply chain and how investors are reacting to shifts in sentiment around the sector. This backdrop helps explain why the share price has been volatile, as investors reassess both risk and opportunity in the stock.
• Daqo New Energy currently scores a valuation check of 4 out of 6. Next, we will compare what different valuation approaches say about the stock before finishing with a more complete way to think about value beyond a single score.

Find out why Daqo New Energy's 32.0% return over the last year is lagging behind its peers.

Approach 1: Daqo New Energy Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company could be worth today by projecting its future cash flows and then discounting those back to a single present value figure.

For Daqo New Energy, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve months free cash flow is a loss of $511.07 million, which means the company is currently burning cash rather than generating it. Analysts have provided free cash flow estimates out to 2027, for example $104.63 million in 2027, and Simply Wall St extrapolates these further so that projected free cash flow in 2035 is $1,225.47 million.

When these projected cash flows are discounted back to today, the DCF model arrives at an estimated intrinsic value of $117.31 per share. Compared with the current share price, this implies the stock is 78.5% undervalued according to this framework.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Daqo New Energy is undervalued by 78.5%. Track this in your watchlist or portfolio, or discover 863 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Daqo New Energy.

Approach 2: Daqo New Energy Price vs Sales

For a company where profits are not the main focus or are volatile, the P/S ratio can be a useful way to compare what investors are paying for each dollar of revenue. It helps you sidestep short term earnings swings and look at valuation against the top line instead.

In general, higher growth expectations and lower perceived risk tend to support a higher "normal" P/S multiple, while slower expected growth or higher risk usually line up with a lower P/S. So context really matters when you are comparing simple multiples.

Daqo New Energy currently trades on a P/S of 2.64x. This sits below both the Semiconductor industry average P/S of 5.64x and the peer group average of 5.68x. Simply Wall St also calculates a proprietary “Fair Ratio” of 1.14x for Daqo New Energy, which is the P/S level its model suggests given factors such as the company’s earnings profile, industry, profit margins, market cap and risk characteristics.

That Fair Ratio is more tailored than a plain comparison with peers or the industry, because it aims to adjust for the company’s own growth outlook, risk profile and financial quality rather than assuming all companies deserve similar multiples.

Since the current P/S of 2.64x is higher than the Fair Ratio of 1.14x, the stock screens as overvalued on this metric.

Result: OVERVALUED

P/S ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1445 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Daqo New Energy Narrative

Earlier we mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you attach a clear story about Daqo New Energy to the numbers by linking your view of its future revenue, earnings and margins to a financial forecast, a fair value, and a simple comparison with the current share price. All of this is available within an accessible tool on the Community page that updates as new news or earnings arrive. For example, one investor might back a more optimistic Daqo view that lines up with assumptions like revenue of US$2.4b, earnings of US$226.9m and a P/E of 10.2x by 2028, while another might lean toward a more cautious stance closer to the lower analyst targets. Each of those Narratives will show a different fair value signal you can compare to today’s price to help you decide whether the stock looks attractive or not based on your own expectations.

Do you think there's more to the story for Daqo New Energy? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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