Critical Review: DAQO New Energy (NYSE:DQ) vs. Linde (NASDAQ:LIN)

Linde (NASDAQ:LIN) and DAQO New Energy (NYSE:DQ) are both basic materials companies, but which is the superior business? We will contrast the two companies based on the strength of their analyst recommendations, valuation, risk, institutional ownership, dividends, profitability and earnings.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Linde	21.17%	19.38%	9.20%
DAQO New Energy	-53.74%	-5.89%	-5.42%

Analyst Ratings

This is a breakdown of current ratings and price targets for Linde and DAQO New Energy, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Linde	0	0	8	2	3.20
DAQO New Energy	1	2	3	1	2.57

Linde presently has a consensus target price of $501.00, indicating a potential upside of 20.46%. DAQO New Energy has a consensus target price of $27.04, indicating a potential downside of 15.88%. Given Linde’s stronger consensus rating and higher probable upside, equities analysts plainly believe Linde is more favorable than DAQO New Energy.

Risk & Volatility

Linde has a beta of 0.85, indicating that its share price is 15% less volatile than the S&P 500. Comparatively, DAQO New Energy has a beta of 0.66, indicating that its share price is 34% less volatile than the S&P 500.

Insider & Institutional Ownership

82.8% of Linde shares are held by institutional investors. Comparatively, 47.2% of DAQO New Energy shares are held by institutional investors. 0.7% of Linde shares are held by insiders. Comparatively, 24.3% of DAQO New Energy shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Valuation & Earnings

This table compares Linde and DAQO New Energy”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Linde	$33.50 billion	5.80	$6.57 billion	$14.93	27.86
DAQO New Energy	$1.03 billion	2.09	-$345.21 million	($5.14)	-6.25

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

Summary

Linde beats DAQO New Energy on 14 of the 15 factors compared between the two stocks.

About Linde

Linde plc operates as an industrial gas company in the Americas, Europe, the Middle East, Africa, Asia, and South Pacific. It offers atmospheric gases, including oxygen, nitrogen, argon, and rare gases; and process gases, such as carbon dioxide, helium, hydrogen, electronic gases, specialty gases, and acetylene. The company also designs and constructs turnkey process plants for third-party customers, as well as for the gas businesses in various locations, such as air separation, hydrogen, synthesis, olefin, and natural gas plants. It serves a range of industries, including healthcare, chemicals and energy, manufacturing, metals and mining, food and beverage, and electronics. The company was founded in 1879 and is based in Woking, the United Kingdom.

About DAQO New Energy

Daqo New Energy Corp., together with its subsidiaries, manufactures and sells polysilicon to photovoltaic product manufacturers in the People's Republic of China. Its products are used in ingots, wafers, cells, and modules for solar power solutions. 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 based in Shanghai, the People's Republic of China.