Investors interested in stocks from the Alternative Energy – Other sector have probably already heard of Constellation Energy Corporation (CEG) 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.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Constellation Energy Corporation is sporting a Zacks Rank of #2 (Buy), while Ormat Technologies has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that CEG likely has seen a stronger improvement to its earnings outlook than ORA has recently. 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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company’s fair value.
CEG currently has a forward P/E ratio of 17.18, while ORA has a forward P/E of 64.02. We also note that CEG has a PEG ratio of 0.84. 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 5.82.
Another notable valuation metric for CEG is its P/B ratio of 1.56. The P/B ratio is used to compare a stock’s market value with its book value, which is defined as total assets minus total liabilities. For comparison, ORA has a P/B of 2.21.
Based on these metrics and many more, CEG holds a Value grade of A, while ORA has a Value grade of C.
CEG 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 CEG is likely the superior value option right now.
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