Daqo New Energy Corp. :DQ-US: Earnings Analysis: 2016 By the Numbers : April 11, 2017

Daqo New Energy Corp. reports financial results for the year ended December 31, 2016.

Highlights

  • Gross margins widened from 20.63% to 35.11% compared to the same period last year, operating (EBITDA) margins now 41.09% from 30.42%.
  • Change in operating cash flow of 23.07% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline largely a result of non-operational activity, pretax margins improved from 7.79% to 22.38%.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 228.51 181.93 181.86 109.12 86.85
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 43.38 12.95 16.58 -71.02 -109.53
Earnings Growth (YOY) 235.03 -21.92 123.35 35.15 -428.72
Net Margin 18.98 7.12 9.12 -65.09 -126.11
EPS 3.99 1.25 1.99 -10.26 -15.75
Return on Equity 16.89 5.8 9.69 -29.7 -27.63
Return on Assets 6.58 1.9 2.52 -9.96 -12.93

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Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 20.63% to 35.11% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 30.42% to 41.09% compared to the same period last year. For comparison, gross margins were 20.63% and EBITDA margins were 30.42% in the last reporting period.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

DQ-US‘s year-on-year change in operating cash flow of 23.07% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s earnings decline is largely a result of non-operational activity. As a matter of fact, the company showed increases in operating (EBIT) and pretax margins. EBIT margins improved from 13.20% to 26.33% and pretax margins widened from 7.79% to 22.38%.

EBIT Margin History
PreTax Margin History

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Company Profile

Daqo New Energy Corp. is a holding company, which engages in the manufacture and sale of polysilicon products for solar cell and module manufacturers. It operates through the Polysilicon and Wafer segments. The company was founded on November 22, 2007 and is headquartered in Wanzhou, China.

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