Daqo New Energy (NYSE:DQ) and Taiwan Semiconductor Mfg. (NYSE:TSM) are both basic materials companies, but which is the better business? We will contrast the two businesses based on the strength of their earnings, risk, valuation, profitability, analyst recommendations, institutional ownership and dividends.

Profitability

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

Net Margins Return on Equity Return on Assets
Daqo New Energy 17.71% 17.53% 10.23%
Taiwan Semiconductor Mfg. 34.38% 22.62% 17.29%

Analyst Recommendations

This is a breakdown of current ratings and target prices for Daqo New Energy and Taiwan Semiconductor Mfg., as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Daqo New Energy 0 1 2 0 2.67
Taiwan Semiconductor Mfg. 0 2 6 0 2.75

Daqo New Energy presently has a consensus target price of $53.00, suggesting a potential upside of 112.25%. Taiwan Semiconductor Mfg. has a consensus target price of $42.00, suggesting a potential upside of 12.18%. Given Daqo New Energy’s higher possible upside, research analysts plainly believe Daqo New Energy is more favorable than Taiwan Semiconductor Mfg..

Valuation and Earnings

This table compares Daqo New Energy and Taiwan Semiconductor Mfg.’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Daqo New Energy $352.85 million 0.74 $92.84 million $8.50 2.94
Taiwan Semiconductor Mfg. $32.11 billion 6.05 $11.64 billion $2.17 17.25

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

Institutional and Insider Ownership

38.8% of Daqo New Energy shares are held by institutional investors. Comparatively, 19.4% of Taiwan Semiconductor Mfg. shares are held by institutional investors. 1.1% of Taiwan Semiconductor Mfg. shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Risk and Volatility

Daqo New Energy has a beta of 1.35, suggesting that its stock price is 35% more volatile than the S&P 500. Comparatively, Taiwan Semiconductor Mfg. has a beta of 1.18, suggesting that its stock price is 18% more volatile than the S&P 500.

Dividends

Taiwan Semiconductor Mfg. pays an annual dividend of $1.04 per share and has a dividend yield of 2.8%. Daqo New Energy does not pay a dividend. Taiwan Semiconductor Mfg. pays out 47.9% of its earnings in the form of a dividend. Taiwan Semiconductor Mfg. has increased its dividend for 3 consecutive years.

Summary

Taiwan Semiconductor Mfg. beats Daqo New Energy on 12 of the 17 factors compared between the two stocks.

Daqo New Energy Company Profile

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.

Taiwan Semiconductor Mfg. Company Profile

Taiwan Semiconductor Manufacturing Company Limited, together with its subsidiaries, engages in manufacturing, selling, packaging, testing, and computer-aided design of integrated circuits and other semiconductor devices. The company manufactures masks and electronic spare parts; researches, develops, designs, manufactures, sells, packages, and tests color filters; and offers customer and engineering support services. It is also involved in investing activities. The company operates in Taiwan, the United States, Asia, Europe, the Middle East, Africa, and internationally. Taiwan Semiconductor Manufacturing Company Limited was founded in 1987 and is headquartered in HsinChu, Taiwan.

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