Investors looking for stocks in the Alternative Energy - Other sector might want to consider either Clearway Energy (CWENA) 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.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Clearway Energy and Ormat Technologies are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that CWENA likely has seen a stronger improvement to its earnings outlook than ORA has recently. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
CWENA currently has a forward P/E ratio of 17.41, while ORA has a forward P/E of 49.46. We also note that CWENA has a PEG ratio of 0.31. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ORA currently has a PEG ratio of 4.95.
Another notable valuation metric for CWENA is its P/B ratio of 1.2. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, ORA has a P/B of 2.87.
These metrics, and several others, help CWENA earn a Value grade of B, while ORA has been given a Value grade of D.
CWENA is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that CWENA is likely the superior value option right now.
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See This Stock Now for Free >>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.
