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CWEN vs. ORA: Which Stock Is the Better Value Option?

Zacks Equity Research

Investors looking for stocks in the Alternative Energy - Other sector might want to consider either NRG Yield (CWEN) or 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, NRG Yield has a Zacks Rank of #1 (Strong Buy), while Ormat Technologies has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that CWEN is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

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.

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.

CWEN currently has a forward P/E ratio of 11.17, while ORA has a forward P/E of 38.48. We also note that CWEN has a PEG ratio of 1.12. 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 3.50.

Another notable valuation metric for CWEN is its P/B ratio of 1.59. 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 2.26.

Based on these metrics and many more, CWEN holds a Value grade of B, while ORA has a Value grade of D.

CWEN stands above ORA thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CWEN is the superior value option right now.


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