Investors interested in stocks from the Alternative Energy - Other sector have probably already heard of NRG Yield (CWEN - Free Report) and Ormat Technologies (ORA - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, NRG Yield has a Zacks Rank of #2 (Buy), while Ormat Technologies has a Zacks Rank of #3 (Hold). 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. But this is just one factor that value investors are interested in.
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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
CWEN currently has a forward P/E ratio of 29.36, while ORA has a forward P/E of 43.82. We also note that CWEN has a PEG ratio of 2.94. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ORA currently has a PEG ratio of 3.98.
Another notable valuation metric for CWEN 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 2.62.
Based on these metrics and many more, CWEN holds a Value grade of B, while ORA has a Value grade of D.
CWEN 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 CWEN is likely the superior value option right now.