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Investors interested in stocks from the Alternative Energy - Other sector have probably already heard of Clearway Energy (CWENA) 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Clearway Energy is sporting a Zacks Rank of #2 (Buy), while Ormat Technologies has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that CWENA likely has seen a stronger improvement to its earnings outlook than ORA has recently. 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.
CWENA currently has a forward P/E ratio of 19.03, while ORA has a forward P/E of 34.06. We also note that CWENA has a PEG ratio of 0.47. 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 3.41.
Another notable valuation metric for CWENA is its P/B ratio of 1.02. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ORA has a P/B of 1.70.
These are just a few of the metrics contributing to CWENA's Value grade of B and ORA's Value grade of C.
CWENA sticks out from ORA in both our Zacks Rank and Style Scores models, so value investors will likely feel that CWENA is the better option right now.
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This article originally published on Zacks Investment Research (zacks.com).