Investors with an interest in Alternative Energy - Other stocks have likely encountered both TC Energy (TRP - Free Report) and Ormat Technologies (ORA - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, TC Energy is sporting a Zacks Rank of #2 (Buy), while Ormat Technologies has a Zacks Rank of #3 (Hold). This means that TRP's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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 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.
TRP currently has a forward P/E ratio of 16.50, while ORA has a forward P/E of 41.88. We also note that TRP has a PEG ratio of 2.36. 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 3.81.
Another notable valuation metric for TRP is its P/B ratio of 2.31. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, ORA has a P/B of 2.52.
Based on these metrics and many more, TRP holds a Value grade of B, while ORA has a Value grade of D.
TRP stands above ORA thanks to its solid earnings outlook, and based on these valuation figures, we also feel that TRP is the superior value option right now.