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Surging Earnings Estimates Signal Upside for Daqo (DQ) Stock

Zacks Equity Research
·2-min read

Daqo New Energy (DQ) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.

The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this solar panel parts maker, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For Daqo, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.

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The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

For the current quarter, the company is expected to earn $2.60 per share, which is a change of +664.71% from the year-ago reported number.

Over the last 30 days, the Zacks Consensus Estimate for Daqo has increased 50.29% because one estimate has moved higher compared to no negative revisions.

Current-Year Estimate Revisions

The company is expected to earn $9.06 per share for the full year, which represents a change of +348.51% from the prior-year number.

In terms of estimate revisions, the trend for the current year also appears quite encouraging for Daqo. Over the past month, two estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 24.47%.

Favorable Zacks Rank

Thanks to promising estimate revisions, Daqo currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Daqo shares have added 13.9% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.


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DAQO New Energy Corp. (DQ) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research