NGG or ORA: Which Is the Better Value Stock Right Now?
Investors with an interest in Alternative Energy - Other stocks have likely encountered both National Grid (NGG) and Ormat Technologies (ORA). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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, National Grid has a Zacks Rank of #2 (Buy), while Ormat Technologies has a Zacks Rank of #3 (Hold). This means that NGG's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst 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 12.27, while ORA has a forward P/E of 35.10. We also note that NGG has a PEG ratio of 1.03. 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 3.51.
Another notable valuation metric for NGG is its P/B ratio of 1.48. 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 2.05.
These are just a few of the metrics contributing to NGG's Value grade of B and ORA's Value grade of D.
NGG sticks out from ORA in both our Zacks Rank and Style Scores models, so value investors will likely feel that NGG is the better option right now.
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This article originally published on Zacks Investment Research (zacks.com).
