Ormat Technologies, Inc. (ORA) is a leading geothermal company that develops, operates, and sells geothermal and REG power plants. It is the only vertically integrated company engaged in geothermal and recovered energy generation (REG). It conducts its business activities globally in three segments — Electricity segment, Product segment and Energy Storage and Management Services segment.
An expected $2 trillion investment in the clean energy space by the incoming Biden administration brightens prospects for the clean energy industry, positioning ORA well for solid growth.
The company has engineered an efficient and environment-friendly Ormat Energy Converter, which is based on a power generation unit that converts low, medium, and high-temperature heat into electricity. Its flexible, modular solutions for geothermal power are ideal for various industries. These have helped the stock gain 46.5% over the past year.
This impressive performance combined with several other factors has helped ORA earn a “Strong Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates ORA:
Trade Grade: A
ORA is currently trading above its 50-day and 200-day moving averages of $86.10 and $69.89, respectively, indicating that the stock is in an uptrend. In fact, the stock’s 46.8% gains over the past six months reflect solid short-term bullishness.
ORA’s operating income has increased 33.5% year-over-year to $51.69 million in the fiscal third quarter ended September 30, 2020. Its adjusted EBITDA has risen 25.3% from the year-ago value to $107.06 million over the same period.
In December, ORA completed the acquisition of a shovel-ready energy storage asset from Con Edison Development to develop and operate a 25 MW battery energy storage project at its site. This project will provide much needed ancillary services and energy optimization to the wholesale markets of Texas.
In November, ORA resumed operation of the Puna Geothermal Power Plant, which supplies electricity to the Hawaii Island grid, two and a half years after a devastating volcanic eruption. This will provide a clean, renewable base-load energy to Hawaii, reducing the need of fossil fuels to generate electricity.
Buy & Hold Grade: A
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers , ORA is well-positioned. The stock is currently trading 6.9% below its 52-week high of $117.93.
ORA’s net revenue has grown at a CAGR of 4.6% over the past five years. This can be attributed to the company’s successful strategy of deploying renewable energy and fast-acting energy storage resources across its power plants, along with effectively coping with the increased frequency of extreme weather events.
Peer Grade: A
ORA is currently ranked #12 of 50 stocks in the Industrial – Manufacturing Industry. Other popular stocks in this industry are Honeywell International Inc. (HON), Siemens AG (SIEGY) and General Electric Company (GE).
HON, SIEGY and GE gained 16.9%, 17.2% and 0.9%, respectively over the past year. This compares to ORA’s 46.5% return over this period.
Industry Rank: A
The Industrial – Manufacturing Industry is ranked #9 of the 123 StockNews.com industries. The companies in this industry are focused on providing aircraft engines, integrated avionics, connectivity and sensors solutions, and related products and services. They serve aircraft manufacturers and operators, airlines, military services, and defense and space contractors.
As the pandemic’s disruptions have begun to subside with the easing of lockdown restrictions, the manufacturing sector has started recovering. Manufacturers have streamlined their production methods for financial and operational flexibility by cutting costs and by accelerating the deployment of Industrial IoT and AI-based insights.
Because the COVID-19 vaccine distributions have begun, manufacturers are now reprioritizing their future supply chain spending while rapidly accelerating their digital investments. This should bolster this industry’s growth soon.
Overall POWR Rating: A (Strong Buy)
ORA is rated “Strong Buy” due to its impressive past performance and short-term bullishness, as determined by the four components of our overall POWR Rating.
Despite climbing more than 45% over the past three months, we think ORA has the potential to climb higher based on its continued business growth, favorable earnings and revenue outlook and price momentum.
Analyst sentiment, which gives a good sense of a stock’s future price movement, is good for ORA. It has an average broker rating of 1.67, indicating favorable analyst sentiment. Of six Wall Street analysts that rated the stock, two rated it “Strong Buy.”
The consensus EPS estimate of $0.37 for the about-to-be reported quarter (ended December 31, 2020) indicates a 54.2% rise year-over-year. The company’s EPS is expected to rise at a rate of 15.2% per annum over the next five years. This outlook should keep ORA’s price momentum alive in the near term.
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ORA shares were trading at $111.32 per share on Wednesday afternoon, up $1.55 (+1.41%). Year-to-date, ORA has gained 23.31%, versus a 1.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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