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NEP or ORA: Which Is the Better Value Stock Right Now?

Zacks Equity Research
BankUnited (BKU) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Investors looking for stocks in the Alternative Energy - Other sector might want to consider either NextEra Energy Partners (NEP) or 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.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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.

Right now, NextEra Energy Partners is sporting a Zacks Rank of #1 (Strong Buy), while Ormat Technologies has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that NEP is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle 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.

NEP currently has a forward P/E ratio of 19.72, while ORA has a forward P/E of 24.50. We also note that NEP has a PEG ratio of 2.19. 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 2.23.

Another notable valuation metric for NEP is its P/B ratio of 0.69. 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 1.93.

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

NEP stands above ORA thanks to its solid earnings outlook, and based on these valuation figures, we also feel that NEP is the superior value option right now.


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