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Investors with an interest in Alternative Energy - Other stocks have likely encountered both 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 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.
Clearway Energy and Ormat Technologies are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CWENA has an improving earnings outlook. However, value investors will care about much more than just this.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
CWENA currently has a forward P/E ratio of 17.52, while ORA has a forward P/E of 32.70. We also note that CWENA has a PEG ratio of 0.43. 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 3.27.
Another notable valuation metric for CWENA is its P/B ratio of 0.94. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, ORA has a P/B of 1.63.
These metrics, and several others, help CWENA earn a Value grade of A, while ORA has been given a Value grade of C.
CWENA stands above ORA thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CWENA is the superior value option right now.
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This article originally published on Zacks Investment Research (zacks.com).