The World's #1 Renewable Energy Network for News, Information, and Companies.
Untitled Document

Ormat Technologies: Shame About the Price

Ormat Technologies (NYSE:ORA) reported a great quarter last week, beating analyst expectations for both earnings and revenues.

Investors loved it: ORA was up 8% on the day to $20.69, and are up 14 percent at $21.85 as I write.

I’m a big fan of geothermal power, and would love to own Ormat at the right price.  They have a great business with strong technology and fairly reliable cash flow.

Yet, I have not owned Ormat stock since 2006.  The company is simply too expensive, quite likely because it is the only geothermal company large and liquid enough to be owned by institutional investors.

Although Ormat trades near book value ($19.99/share), it’s in a very capital intensive business with thin profit margins.  Profits have recently been depressed by the low natural gas price, against which some of the electricity it sells is priced.  Because of this and some problems at the firm’s North Brawley plants,  Ormat showed a profit of only $0.40 in 2011.

Going forward, analysts expect a $0.58 profit in 2012, and $0.76 in 2013.  That’s nice earnings growth, but it’s not driven by revenues, it’s driven by cost control.  Revenue is expected to grow only 13 percent in 2012, and only 5 percent in 2013.  Given the geothermal industry’s capital intensity and Ormat’s large size, it would be crazy to expect long term growth of more than 10 percent going forward.

For a company with moderate growth prospects like Ormat, the current price of $21.85 puts the forward P/E at 38.  That’s two to three times too expensive for my taste.  I also have trouble getting excited the fact that they recently doubled their quarterly dividend to $0.04.  “Double” sounds great, but a 0.7 percent dividend yield leaves me wanting a few more doubles.

Disclosure: None

 

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

This article first appeared on the author's Forbes.com Green Stocks blog and AltEnergy Stocks and was republished with permission.

Untitled Document

RELATED ARTICLES

World Moves Toward 100 Percent Renewable Energy – First Electricity, Then Heating/Cooling, and Finally Transportation

Junko Movellan, Correspondent The exclusive use of energy from renewable resources in at least one sector has now become a feasible goal for 8 countries. Diane Moss, Founding Director of Renewables 100 Policy Institute, discussed this remarkable develop...

US Clean Power Plan Could Include Carbon Trading

Mark Drajem, Bloomberg Some businesses that back President Barack Obama’s plan to curb greenhouse gases are making a late lobbying push to add an element similar to a cap-and-trade program. With the administration set this week or next to unveil ...

Listen Up: Vampires Sucking Power from your House

The Energy Show on Renewable Energy World Here’s a nightmare for you: at night, when you’re asleep and you think things are quiet, there are vampires sucking power out of your house and increasing your electric bill. The fact of the matter is that every plugged in ...

Energy Storage and Geothermal Markets Look To Team Up in the Hunt for Lithium

Meg Cichon In today's fast-paced tech environment, no one can make a splash quite like Elon Musk. So when he decided to enter the energy storage game in 2014, he did it with gusto. Musk is now in the process of building what he coined...
Tom Konrad is a private money manager and freelance writer focused on Peak Oil and Climate Change as investment themes. He manages portfolios for individual clients and is Head of Research for the JPS Green Economy Fund (http://jpsgreeneconomyfund...

CURRENT MAGAZINE ISSUE

Volume 18, Issue 4
1507REW_C11

STAY CONNECTED

To register for our free
e-Newsletters, subscribe today:

SOCIAL ACTIVITY

Tweet the Editors! @megcichon @jennrunyon

FEATURED PARTNERS



EVENTS

GRC Workshop at Indonesian International Geothermal Convention & Ex...

The Geothermal Conceptual Model & Well Targeting The Geothermal Me...

2015 AREDAY Summit

The 12th Annual AREDAY Summit, August 8-13th in Snowmass Colorado. Engag...

StartUp Green

AREI, American Renewable Energy Institute, in partnership with ...

COMPANY BLOGS

Clean Energy Patents Maintain High Levels in First Quarter, Solar L...

U.S. patents for Clean Energy technologies from the first quarter of 201...

Registration Opens for GRC Annual Meeting & GEA Geothermal Energy Expo

GRC Annual Meeting & GEA Expo:   Register Now for the 2015 GRC ...

New Approach to Crowdfunding Renewable Energy Assets

In our business, our goal is to help people improve their quality of lif...

NEWSLETTERS

Renewable Energy: Subscribe Now

Solar Energy: Subscribe Now

Wind Energy: Subscribe Now

Geothermal Energy: Subscribe Now

Bioenergy: Subscribe Now  

 

FEATURED PARTNERS