Daqo New Energy's (NYSE:DQ) earnings growth rate lags the 68% CAGR delivered to shareholders

Investing can be hard but the potential fo an individual stock to pay off big time inspires us. Not every pick can be a winner, but when you pick the right stock, you can win big. Take, for example, the Daqo New Energy Corp. (NYSE:DQ) share price, which skyrocketed 376% over three years. On the other hand, the stock price has retraced 3.5% in the last week.

Since the long term performance has been good but there's been a recent pullback of 3.5%, let's check if the fundamentals match the share price.

See our latest analysis for Daqo New Energy

SWOT Analysis for Daqo New Energy

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

During three years of share price growth, Daqo New Energy achieved compound earnings per share growth of 291% per year. The average annual share price increase of 68% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time. This cautious sentiment is reflected in its (fairly low) P/E ratio of 1.84.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Daqo New Energy has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Daqo New Energy's financial health with this free report on its balance sheet.

A Different Perspective

It's good to see that Daqo New Energy has rewarded shareholders with a total shareholder return of 3.0% in the last twelve months. However, the TSR over five years, coming in at 33% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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. Take risks, for example - Daqo New Energy has 1 warning sign we think you should be aware of.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.