Investors interested in stocks from the Alternative Energy - Other sector have probably already heard of National Grid (NGG) and Ormat Technologies (ORA). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
National Grid has a Zacks Rank of #2 (Buy), while Ormat Technologies has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that NGG is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
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.
NGG currently has a forward P/E ratio of 13.43, while ORA has a forward P/E of 58.15. We also note that NGG has a PEG ratio of 1.23. 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 5.81.
Another notable valuation metric for NGG is its P/B ratio of 1.54. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, ORA has a P/B of 3.1.
These metrics, and several others, help NGG earn a Value grade of B, while ORA has been given a Value grade of F.
NGG 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 NGG is likely the superior value option right now.
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National Grid Transco, PLC (NGG): Free Stock Analysis Report
Ormat Technologies, Inc. (ORA): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).