Ormat Technologies, Inc. (ORA): A Bull Case Theory

We came across a bullish thesis on Ormat Technologies, Inc. (ORA) on Value Investing Subreddit Page by CanopyResearch. In this article, we will summarize the bulls’ thesis on ORA. Ormat Technologies, Inc. (ORA)'s share was trading at $72.21 as of May 2^nd. ORA’s trailing and forward P/E were 35.40 and 34.48 respectively according to Yahoo Finance.

Ormat Technologies (ORA) is currently undervalued by the market, which is failing to recognize its long-term potential. As the global leader in geothermal power, Ormat provides clean, reliable, 24/7 baseload energy that doesn’t depend on intermittent sources like wind or solar. Approximately 80% of the company’s revenue comes from long-term, inflation-linked contracts in regions such as the U.S., Kenya, and Indonesia, ensuring stable and predictable cash flows. Despite this, Ormat’s stock is undervalued, largely due to the market’s aversion to the lengthy timelines and upfront capital requirements associated with geothermal projects, which can depress short-term return on invested capital (ROIC), even though the long-term cash flows are robust and secure.

What the market overlooks is the growing demand for firm, non-intermittent power sources, particularly in sectors like AI and data centers, where geothermal energy is a perfect fit. Google is already tapping into this potential, highlighting the sector's viability. Ormat also benefits from strong political support globally, and its vertically integrated business model and global diversification further enhance its resilience and growth prospects. With forecasted revenue growth from $937 million to $1.57 billion by 2033, driven by a solid project pipeline and long-term contracts, Ormat is positioned for steady, utility-like growth at an annual rate of around 6%.

The company's EBITDA margin stands at approximately 56%, with a net margin of 15%, and its net debt to EBITDA ratio is around 3.9x. Based on a discounted cash flow (DCF) analysis, Ormat's target price is approximately $87 per share, offering 23% upside from its current level. While Ormat may not offer flashy, speculative growth, its strong moat, diversified global assets, and predictable cash flows make it an attractive investment with significant upside potential when the market re-rates it as a stable infrastructure play.

Ormat Technologies, Inc. (ORA) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 28 hedge fund portfolios held ORA at the end of the fourth quarter which was 18 in the previous quarter. While we acknowledge the risk and potential of ORA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ORA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.