Investors looking for stocks in the Alternative Energy - Other sector might want to consider either Ameresco (AMRC) or Ormat Technologies (ORA). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Ameresco and Ormat Technologies are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that AMRC's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
AMRC currently has a forward P/E ratio of 17.48, while ORA has a forward P/E of 41.97. We also note that AMRC has a PEG ratio of 1.59. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ORA currently has a PEG ratio of 4.20.
Another notable valuation metric for AMRC is its P/B ratio of 0.94. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ORA has a P/B of 2.23.
These metrics, and several others, help AMRC earn a Value grade of B, while ORA has been given a Value grade of D.
AMRC has seen stronger estimate revision activity and sports more attractive valuation metrics than ORA, so it seems like value investors will conclude that AMRC is the superior option right now.
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Ormat Technologies, Inc. (ORA) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
