NGG or ORA: Which Is the Better Value Stock Right Now?

Investors looking for stocks in the Alternative Energy - Other sector might want to consider either National Grid (NGG) or Ormat Technologies (ORA). But which of these two companies is the best option for those looking for undervalued stocks? 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, National Grid has a Zacks Rank of #2 (Buy), while Ormat Technologies has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that NGG has an improving earnings outlook. But this is only part of the picture for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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 12.70, while ORA has a forward P/E of 39.96. We also note that NGG has a PEG ratio of 1.07. 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 4.00.

Another notable valuation metric for NGG is its P/B ratio of 1.52. 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 2.22.

These are just a few of the metrics contributing to NGG's Value grade of B and ORA's Value grade of D.

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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This article originally published on Zacks Investment Research (zacks.com).

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