CSAN or ORA: Which Is the Better Value Stock Right Now?

Investors looking for stocks in the Alternative Energy - Other sector might want to consider either Cosan (CSAN) or Ormat Technologies (ORA). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, Cosan is sporting a Zacks Rank of #1 (Strong Buy), while Ormat Technologies has a Zacks Rank of #3 (Hold). This means that CSAN's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

CSAN currently has a forward P/E ratio of 4.01, while ORA has a forward P/E of 42.60. We also note that CSAN has a PEG ratio of 0.13. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ORA currently has a PEG ratio of 4.26.

Another notable valuation metric for CSAN is its P/B ratio of 0.33. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, ORA has a P/B of 2.07.

These are just a few of the metrics contributing to CSAN's Value grade of A and ORA's Value grade of C.

CSAN sticks out from ORA in both our Zacks Rank and Style Scores models, so value investors will likely feel that CSAN is the better option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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