Investors with an interest in Alternative Energy – Other stocks have likely encountered both NextEra Energy Partners (NEP) 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.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
NextEra Energy Partners has a Zacks Rank of #2 (Buy), while Ormat Technologies has a Zacks Rank of #4 (Sell) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that NEP is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
NEP currently has a forward P/E ratio of 20.42, while ORA has a forward P/E of 52.38. We also note that NEP has a PEG ratio of 1.11. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company’s expected earnings growth rate. ORA currently has a PEG ratio of 4.21.
Another notable valuation metric for NEP is its P/B ratio of 0.69. 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 2.10.
These are just a few of the metrics contributing to NEP’s Value grade of B and ORA’s Value grade of C.
NEP has seen stronger estimate revision activity and sports more attractive valuation metrics than ORA, so it seems like value investors will conclude that NEP is the superior option right now.
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