Those who invested in Daqo New Energy (NYSE:DQ) five years ago are up 380%
Long term investing can be life changing when you buy and hold the truly great businesses. While not every stock performs well, when investors win, they can win big. To wit, the Daqo New Energy Corp. (NYSE:DQ) share price has soared 380% over five years. And this is just one example of the epic gains achieved by some long term investors. In the last week the share price is up 1.2%.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
See our latest analysis for Daqo New Energy
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, Daqo New Energy managed to grow its earnings per share at 49% a year. The EPS growth is more impressive than the yearly share price gain of 37% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 2.66 also suggests market apprehension.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Daqo New Energy has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Daqo New Energy stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
While the broader market gained around 6.8% in the last year, Daqo New Energy shareholders lost 43%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 37% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 3 warning signs we've spotted with Daqo New Energy (including 1 which can't be ignored) .
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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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.
