Ormat Technologies (ORA): Evaluating Valuation After UBS Reiterates Buy on Geothermal and Solar Expansion

Ormat Technologies (ORA) is in the spotlight after UBS reaffirmed a 'Buy' rating, citing the company’s continued progress expanding its geothermal and energy storage assets. This month, Ormat completed its acquisition of the Blue Mountain geothermal power plant, with immediate plans to upgrade the site and add a new 13MW solar facility. For investors interested in the renewables sector, these developments may be seen as tangible evidence that Ormat is increasing its focus on rapidly growing energy markets. However, what does this mean for the stock right now?

Reviewing recent performance, Ormat has quietly delivered solid returns. Over the past year, the stock is up 28%, benefiting from activity on the acquisition front and growing market interest in clean energy companies. Shares have gained momentum, rising 31% over the past three months and advancing 37% year to date. This trend suggests that expectations for future growth may have increased recently. The company’s annual revenue and net income are also trending upward, although the three-year return of just 2% indicates a period of slower progress before this recent increase.

With the stock moving higher in recent months, it is worth considering whether there is still potential for further gains or if the market has already factored in Ormat’s next phase.

Most Popular Narrative: Fairly Valued

According to community narrative, Ormat Technologies is currently seen as fairly valued, with the analyst consensus price target only slightly above its current share price.

Recent federal permitting reforms and policy support have significantly expedited geothermal project development timelines in the U.S. This has enabled Ormat to accelerate greenfield expansion and release more projects for construction, which is likely to drive faster revenue growth and increased long-term cash flows.

What is fueling Ormat’s price target? Discover which crucial growth rates are being bet on, and why the consensus thinks the company is just about fairly priced now. The underlying projections are bold; the upside is tantalizing. Find out which future assumptions could move the stock. Do you agree with the numbers behind this narrative?

Result: Fair Value of $94.60 (ABOUT RIGHT)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent dependence on Chinese batteries and tightening U.S. regulations may threaten Ormat’s storage segment growth and long-term revenue stability.

Find out about the key risks to this Ormat Technologies narrative.

Another View: DCF Analysis Raises Questions

Taking a different approach, our DCF model suggests Ormat may be priced above its underlying long-term cash flows. This presents a challenge to the fair value estimate derived from multiples. Which view tells the real story?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Ormat Technologies for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Ormat Technologies Narrative

If you see things differently or would rather shape your own perspective, it is easy to build your own research-based view in just minutes. This way, you can do it your way.

A great starting point for your Ormat Technologies research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

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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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