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AMRC vs. ORA: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Investors interested in Alternative Energy - Other stocks are likely familiar with Ameresco (AMRC) 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.

Ameresco has a Zacks Rank of #2 (Buy), while Ormat Technologies has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that AMRC is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

AMRC currently has a forward P/E ratio of 18.16, while ORA has a forward P/E of 25.51. We also note that AMRC has a PEG ratio of 1.04. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ORA currently has a PEG ratio of 2.32.

Another notable valuation metric for AMRC is its P/B ratio of 1.87. 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 2.01.

Based on these metrics and many more, AMRC holds a Value grade of B, while ORA has a Value grade of C.

AMRC 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 AMRC is likely the superior value option right now.


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