NGG or ORA: Which Is the Better Value Stock Right Now?
Investors interested in stocks from the Alternative Energy - Other sector have probably already heard of National Grid (NGG) and Ormat Technologies (ORA). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, National Grid has a Zacks Rank of #2 (Buy), while Ormat Technologies has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that NGG has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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.
NGG currently has a forward P/E ratio of 12.35, while ORA has a forward P/E of 36.01. We also note that NGG has a PEG ratio of 1.04. 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 3.60.
Another notable valuation metric for NGG is its P/B ratio of 1.49. 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 2.1.
These are just a few of the metrics contributing to NGG's Value grade of B and ORA's Value grade of D.
NGG 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 NGG is likely the superior value option right now.
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See Stocks Now >>National Grid Transco, PLC (NGG) : Free Stock Analysis Report
Ormat Technologies, Inc. (ORA) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
