Ormat Technologies, Inc. (NYSE:ORA), which is in the renewable energy business, and is based in United States, led the NYSE gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Ormat Technologies’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What’s the opportunity in Ormat Technologies?
According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 42.47x is currently trading in-line with its industry peers’ ratio, which means if you buy Ormat Technologies today, you’d be paying a relatively reasonable price for it. Although, there may be an opportunity to buy in the future. This is because Ormat Technologies’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Ormat Technologies generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Ormat Technologies’s earnings over the next few years are expected to increase by 38%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in ORA’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at ORA? Will you have enough conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping tabs on ORA, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for ORA, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Ormat Technologies. You can find everything you need to know about Ormat Technologies in the latest infographic research report. If you are no longer interested in Ormat Technologies, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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