Investing

Fintel Indicators point to Daqo New Energy as the Top QVM Stock in the US Market

Global solar sector polysilicon provider Daqo New Energy has topped Fintel’s Quality, Value and Momentum (QVM) leader board this week, notching a bullish 96.86 score. The stock rose 62% in the year to date, and the NYSE-listed stock sports a $5 billion market capitalization.

.Daqo New Energy makes high-purity polysilicon that the global solar industry uses

The global solar industry accounted for 3.1% of global electricity generation in 2020, with output expected to increase more than 700% by 2030, according to the International Energy Agency (IEA).

Daqo, founded in 2008, is one of the world’s lowest-cost polysilicon producers at its advanced, highly efficient plant in Xinjiang, China.

DQ recently climbed to the top of Fintel’s QVM screen as the company exhibited attractive metrics in each category.

DQ’s strong 6-month share price performance since early 2022 contributed to a “momentum” score of 94.97. Over a 6-month time frame, the stock is trading about 70% higher.

The company’s high “value” score of 95.63 can be tied to its high profits for shareholders.

On Aug., the company reported second quarter earnings per ADS of $8.18, rising from $3.03 in the prior year. This was based on a net income of $627.8 million attributable to shareholders, up from $232 million in 2021. The company has a PE ratio of around 3.3x, which is significantly lower than the S & P 500.

“Quality,” the last factor in calculating Fintel’s score,  is based on the company’s level of cash-generating efficiencies.

In the half of 2022, the company’s revenue rose to more than  $1.2 billion per quarter and generated significant income from operations thanks to its 76.1% gross margin in the second quarter, up from 68.7% a year ago.

On June 30, the company held about $3.3 billion in cash and $4.6 billion of liquidity, including bank note receivables, almost equal to the market cap alone.

A chart, cited from the financial analysis page, illustrates the company’s exponential revenue growth from 2021. The chart indicates that the latest rally is backed by improving financials rather than hype at the start of the pandemic.

What analysts think of the stock:

Analyst Johnson Wan from Jefferies said the outlook for the company as management increases production is positive, and polysilicon prices are high. Jefferies continues to have a ‘buy’ recommendation on the stock with a $112.08 price target.

Goldman Sachs’s Chao Ji believes potentially higher product prices due to supply restrictions in Sichuan will benefit Daqo as all of its capacity is based in Xinjiang. The broker has a ‘buy’ recommendation on the stock with a $140 price target.

DQ has a consensus ‘overweight’ rating across the various institutions that cover the stock and attribute an average $90.90 price target, suggesting a 33% further upside to the stock.

This article originally appeared on Fintel

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