NeoPhotonics (NYSE:NPTN) and Daqo New Energy (NYSE:DQ) Critical Analysis

NeoPhotonics (NYSE:NPTN) and Daqo New Energy (NYSE:DQ) are both small-cap computer and technology companies, but which is the superior stock? We will compare the two companies based on the strength of their analyst recommendations, risk, valuation, dividends, profitability, earnings and institutional ownership.

Volatility & Risk

NeoPhotonics has a beta of 1.61, indicating that its stock price is 61% more volatile than the S&P 500. Comparatively, Daqo New Energy has a beta of 1.83, indicating that its stock price is 83% more volatile than the S&P 500.

Insider & Institutional Ownership

77.1% of NeoPhotonics shares are held by institutional investors. Comparatively, 32.7% of Daqo New Energy shares are held by institutional investors. 16.0% of NeoPhotonics shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares NeoPhotonics and Daqo New Energy’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
NeoPhotonics $322.54 million 0.85 -$43.64 million ($0.74) -7.77
Daqo New Energy $301.60 million 1.57 $38.13 million $4.44 9.84

Daqo New Energy has lower revenue, but higher earnings than NeoPhotonics. NeoPhotonics is trading at a lower price-to-earnings ratio than Daqo New Energy, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of current recommendations and price targets for NeoPhotonics and Daqo New Energy, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
NeoPhotonics 0 2 5 0 2.71
Daqo New Energy 0 0 2 0 3.00

NeoPhotonics currently has a consensus target price of $7.92, indicating a potential upside of 37.68%. Daqo New Energy has a consensus target price of $58.00, indicating a potential upside of 32.72%. Given NeoPhotonics’ higher possible upside, equities analysts clearly believe NeoPhotonics is more favorable than Daqo New Energy.

Profitability

This table compares NeoPhotonics and Daqo New Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
NeoPhotonics -10.86% -14.40% -6.70%
Daqo New Energy 4.51% 8.59% 5.27%

Summary

Daqo New Energy beats NeoPhotonics on 9 of the 14 factors compared between the two stocks.

About NeoPhotonics

NeoPhotonics Corporation develops, manufactures, and sells optoelectronic products that transmit, receive, and switch high speed digital optical signals for communications networks. It offers high speed products, including transmitter, receiver, and switching products for 100G (gigabits per second) and optical transmission applications over distances of 2 to 2,000 kilometers; optical components for coherent systems, including narrow linewidth tunable transmit and local oscillator lasers (NLW-ITLA) that generate ultra-pure wavelength or color for coherent transmission, as well as coherent micro-modulators, which encode the information on the intensity and phase of the optical beam; and integrated coherent receivers (ICRs) that decode the phase and polarization encoded coherent signals. The company also engages in developing pluggable coherent modules that combine NLW-ITLA with ICR and a coherent modulator; and offers 100G products for the client side and datacenter applications. In addition, it offers network products and solutions, including application-specific passive optical functionalities in modules or sub-system configurations; transceiver modules for various low speed access and mobile backhaul applications; and products for test and measurement, instrumentation, industrial, and research applications. The company sells its products to network equipment manufacturers through a direct sales force in North America, Europe, and Asia. The company was formerly known as NanoGram Corporation and changed its name to NeoPhotonics Corporation in 2002. NeoPhotonics Corporation was founded in 1996 and is headquartered in San Jose, California.

About Daqo New Energy

Daqo New Energy Corp., together with its subsidiaries, manufactures and sells polysilicon and wafers in the People's Republic of China. It operates through two segments, Polysilicon and Wafers. The company offers polysilicon to photovoltaic product manufacturers who further process its polysilicon into ingots, wafers, cells, and modules for solar power solutions. It also provides multi-crystalline wafers. The company was formerly known as Mega Stand International Limited and changed its name to Daqo New Energy Corp. in August 2009. Daqo New Energy Corp. was founded in 2006 and is headquartered in Wanzhou, the People's Republic of China.

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