Investors with an interest in Alternative Energy - Other stocks have likely encountered both 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.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, National Grid has a Zacks Rank of #2 (Buy), while Ormat Technologies has a Zacks Rank of #3 (Hold). This means that NGG's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
NGG currently has a forward P/E ratio of 12.31, while ORA has a forward P/E of 34.75. We also note that NGG has a PEG ratio of 1.04. 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 3.48.
Another notable valuation metric for NGG is its P/B ratio of 1.48. 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 2.03.
These metrics, and several others, help NGG earn a Value grade of B, while ORA has been given a Value grade of D.
NGG sticks out from ORA in both our Zacks Rank and Style Scores models, so value investors will likely feel that NGG is the better 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).