Daqo New Energy Corp.'s DQ shares are up 29.2% over the past six months. The company has also topped its industry’s decline of 21.6% over the same time frame.
The leading producer of high-purity polysilicon has a market cap of roughly $700.7 million and average volume of shares traded in the last three months is around 296.3K. The company has an expected long-term earnings per share growth rate of 29%, well above the industry average of 9.6%.
Let’s take a look into the factors that are driving this Zacks Rank #2 (Buy) stock.
What’s Aiding the Stock?
Daqo New Energy is benefiting from higher production volumes driven by its Phase 4A polysilicon expansion project. The company, in September 2019, completed the construction and installation of the Phase 4A project. The company, in the fourth quarter of 2019, ramped up production of the additional capacity (of 35,000 metric tons) from this expansion and reached full production capacity in December 2019. With the ramp up of the additional capacity, the company is seeing significant benefits from improved product quality, economics of scale and manufacturing efficiency.
The company’s polysilicon production volumes surged 72% on a sequential comparison basis to 16,204 metric tons in the fourth quarter. It expects polysilicon production volumes for the first quarter of 2020 to be roughly 18,000-19,000 metric tons assuming its facilities to run at full utilization.
Daqo New Energy is also benefiting from lower production costs, as witnessed in the fourth quarter, driven by the Phase 4A expansion. It reduced production costs by 8.5% sequentially in the quarter. The company’s energy efficiency efforts and enhanced manufacturing efficiencies are also contributing to lower costs. It expects continued reduction in production costs in the first quarter.
Moreover, the company is expected to benefit from higher sales volumes. The company expects polysilicon sales volumes to external customers of 17,500-18,500 metric tons in the first quarter, higher than 13,291 metric tons it recorded in the fourth quarter. This should support its first-quarter revenues.
Moreover, earnings estimate revisions have the greatest impact on stock prices. Over the past three months, the Zacks Consensus Estimate for Daqo New Energy for 2020 has increased 8.4%. The Zacks Consensus Estimate for earnings for 2020 of $8.78 for the company reflects an expected year-over-year growth of a whopping 334.6%.
DAQO New Energy Corp. Price and Consensus
DAQO New Energy Corp. price-consensus-chart | DAQO New Energy Corp. Quote
Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space are The Scotts Miracle-Gro Company SMG, NovaGold Resources Inc. NG and Newmont Corporation NEM.
Scotts Miracle-Gro has an expected earnings growth rate of 15.9% for the current fiscal year. The company’s shares have gained roughly 36% in the past year. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NovaGold has a projected earnings growth rate of 11.1% for the current year. It currently carries a Zacks Rank #2. The company’s shares have surged roughly 177% in a year.
Newmont has a projected earnings growth rate of 83.3% for the current year. The company’s shares have rallied around 72% in a year. It currently has a Zacks Rank #2.
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