Investors interested in Alternative Energy - Other stocks are likely familiar with National Grid (NGG) and Ormat Technologies (ORA). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Currently, National Grid has a Zacks Rank of #2 (Buy), while Ormat Technologies has a Zacks Rank of #3 (Hold). 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 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 14.41, while ORA has a forward P/E of 59.28. We also note that NGG has a PEG ratio of 1.32. 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 5.93.
Another notable valuation metric for NGG is its P/B ratio of 1.65. 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 3.16.
Based on these metrics and many more, NGG holds a Value grade of B, while ORA has a Value grade of D.
NGG has seen stronger estimate revision activity and sports more attractive valuation metrics than ORA, so it seems like value investors will conclude that NGG is the superior 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).