Investors looking for stocks in the Alternative Energy - Other sector might want to consider either Ameresco (AMRC - Free Report) or Ormat Technologies (ORA - Free Report) . 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.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Ameresco is sporting a Zacks Rank of #2 (Buy), while Ormat Technologies has a Zacks Rank of #3 (Hold). This means that AMRC's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst 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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
AMRC currently has a forward P/E ratio of 19.13, while ORA has a forward P/E of 26.17. We also note that AMRC has a PEG ratio of 1.09. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ORA currently has a PEG ratio of 2.38.
Another notable valuation metric for AMRC is its P/B ratio of 1.86. 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 1.94.
These metrics, and several others, help AMRC earn a Value grade of B, while ORA has been given a Value grade of C.
AMRC 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 AMRC is likely the superior value option right now.