Is Ormat Technologies (ORA) Pricing Look Stretched After Strong One Year Share Price Rally?

• Wondering whether Ormat Technologies at around US$120 a share looks expensive, fair, or misunderstood on price? This article walks through the key numbers so you can judge the value for yourself.
• The stock has seen a mixed pattern recently, with a 0.3% decline over the last 7 days, a 2.0% return over 30 days, 5.6% year to date, and 74.3% over 1 year, alongside 48.3% over 3 years and 37.0% over 5 years.
• Recent coverage around Ormat has focused on its position in the utilities space and how investors are treating renewable energy focused names as they reassess growth and risk in the sector. This backdrop helps explain why the share price moves have not been uniform across shorter and longer time frames.
• Right now, Ormat scores 0 out of 6 on our valuation checks, as it is assessed as undervalued in none of them. You can see that breakdown in our valuation score. Next we will look at the standard valuation methods one by one and then finish with a way of thinking about value that goes beyond any single model.

Ormat Technologies scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Ormat Technologies Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company might be worth by projecting its future cash flows and then discounting those cash flows back to today using a required return rate.

For Ormat Technologies, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flows in $. The latest twelve month free cash flow is a loss of $235 million, so the model assumes conditions change over time and uses analyst estimates as a starting point.

Analysts provide explicit forecasts up to 2027, with free cash flow projected at $35.95 million in 2026 and $54.2 million in 2027. Beyond that, Simply Wall St extrapolates further, with the ten year projection reaching about $139.06 million in 2035 based on the supplied growth assumptions.

After discounting these projected cash flows, the model arrives at an estimated intrinsic value of about $32.85 per share. Versus a share price around $120, this suggests the stock is assessed as very expensive by this DCF, with an intrinsic discount figure indicating it is viewed as significantly overvalued within this framework.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Ormat Technologies may be overvalued by 265.5%. Discover 53 high quality undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Ormat Technologies.

Approach 2: Ormat Technologies Price vs Earnings

For profitable companies, the P/E ratio is a useful way to gauge how much investors are paying for each dollar of earnings. It ties the share price directly to the bottom line, which is usually what ultimately matters to equity holders.

A “normal” or “fair” P/E often reflects what the market is willing to pay for a company’s growth prospects and risk profile. Higher expected earnings growth or lower perceived risk can support a higher P/E, while slower growth or higher risk usually point to a lower multiple.

Ormat Technologies currently trades on a P/E of about 54.7x. That is higher than the Renewable Energy industry average of roughly 16.2x and above the peer group average of about 37.2x. Simply Wall St’s Fair Ratio for Ormat, which is 23.0x, goes a step further by estimating the P/E you might expect given the company’s earnings growth profile, industry, profit margins, market cap and risk factors.

The Fair Ratio is more tailored than a simple peer or industry comparison because it adjusts for company specific characteristics rather than treating all utilities or renewables names as alike. Comparing Ormat’s current P/E of 54.7x with the Fair Ratio of 23.0x suggests the shares are pricing in much richer terms than this framework implies.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Ormat Technologies Narrative

Earlier we mentioned that there is an even better way to think about value. On Simply Wall St’s Community page you can use Narratives, where you set out your story for Ormat Technologies, link that story to your own forecasts for revenue, earnings and margins, and arrive at a Fair Value you can compare with today’s price. The numbers update automatically when fresh news or earnings arrive. This means one investor might build a bullish Ormat view that aligns with a Fair Value near US$128.60, while another, more cautious on issues like policy support or capital intensity, might land closer to US$85.00. Each investor can then decide for themselves whether the current price looks high, low or about right.

Do you think there's more to the story for Ormat Technologies? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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