Ormat Technologies (ORA) versus FirstEnergy (FE) Critical Analysis

Ormat Technologies (NYSE: ORA) and FirstEnergy (NYSE:FE) are both mid-cap utilities companies, but which is the superior investment? We will contrast the two businesses based on the strength of their analyst recommendations, institutional ownership, profitability, valuation, dividends, earnings and risk.

Volatility and Risk

Ormat Technologies has a beta of 1.22, suggesting that its stock price is 22% more volatile than the S&P 500. Comparatively, FirstEnergy has a beta of 0.25, suggesting that its stock price is 75% less volatile than the S&P 500.

Profitability

This table compares Ormat Technologies and FirstEnergy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ormat Technologies 16.99% 9.41% 4.58%
FirstEnergy -35.99% 19.29% 2.79%

Dividends

Ormat Technologies pays an annual dividend of $0.32 per share and has a dividend yield of 0.5%. FirstEnergy pays an annual dividend of $1.44 per share and has a dividend yield of 4.3%. Ormat Technologies pays out 13.7% of its earnings in the form of a dividend. FirstEnergy pays out -12.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. FirstEnergy is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a summary of recent ratings and price targets for Ormat Technologies and FirstEnergy, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ormat Technologies 0 1 6 0 2.86
FirstEnergy 0 11 4 0 2.27

Ormat Technologies currently has a consensus price target of $66.71, indicating a potential upside of 6.35%. FirstEnergy has a consensus price target of $34.21, indicating a potential upside of 3.22%. Given Ormat Technologies’ stronger consensus rating and higher probable upside, equities research analysts plainly believe Ormat Technologies is more favorable than FirstEnergy.

Institutional & Insider Ownership

46.5% of Ormat Technologies shares are owned by institutional investors. Comparatively, 82.7% of FirstEnergy shares are owned by institutional investors. 14.7% of Ormat Technologies shares are owned by company insiders. Comparatively, 0.3% of FirstEnergy shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Valuation and Earnings

This table compares Ormat Technologies and FirstEnergy’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ormat Technologies $662.59 million 4.79 $93.93 million $2.33 26.92
FirstEnergy $14.56 billion 1.01 -$6.18 billion ($11.77) -2.82

Ormat Technologies has higher earnings, but lower revenue than FirstEnergy. FirstEnergy is trading at a lower price-to-earnings ratio than Ormat Technologies, indicating that it is currently the more affordable of the two stocks.

Summary

Ormat Technologies beats FirstEnergy on 11 of the 16 factors compared between the two stocks.

Ormat Technologies Company Profile

Ormat Technologies, Inc. is engaged in the geothermal and recovered energy power business. The Company designs, develops, builds, owns and operates geothermal and recovered energy-based power plants. Its equipment manufacturing operations are located in Israel. It conducts its business activities in two business segments: Electricity segment and Product segment. The Electricity segment develops, builds, owns and operates geothermal and recovered energy-based power plants in the United States and geothermal power plants in other countries around the world, and sells the electricity it generates. The Product Segment designs, manufactures and sells equipment for geothermal and recovered energy-based electricity generation and remote power units, and provide services relating to the engineering, procurement, construction, operation and maintenance of geothermal, and recovered energy-based power plants. It manufactures products that produce electricity from recovered energy or waste heat.

FirstEnergy Company Profile

FirstEnergy Corp. is a holding company. The Company is engaged in holding, directly or indirectly, all of the outstanding equity of its principal subsidiaries. Its segments include Regulated Distribution, Regulated Transmission, Competitive Energy Services (CES) and Corporate/Other. As of December 31, 2016, the Regulated Distribution segment distributed electricity through the Company’s 10 utility operating companies, serving approximately six million customers, and purchased power for its provider of last resort (POLR), standard offer service (SOS), standard offer service (SSO) and default service requirements in Ohio, Pennsylvania, New Jersey and Maryland. The Regulated Transmission segment transmits electricity through transmission facilities owned and operated by American Transmission Systems, Incorporated (ATSI) and Trans-Allegheny Interstate Line Company (TrAIL). The CES segment primarily supplies electricity to end use customers through retail and wholesale arrangements.

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