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

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.

RELATED ARTICLES

Renewable energy community

State and Metro Governments, Consumer Actions Drive Dramatic Shift in US Energy Landscape

Ron Pernick, Clean Edge The United States is experiencing a significant shift in its energy landscape. Last year, utility-scale wind and solar power combined for 47 percent of new generation capacity in the U.S. Based on this expansion, 11 states ...

May Dividends Rise: Ten Clean Energy Stocks For 2015

Tom Konrad, Contributor My Ten Clean Energy Stocks for 2015 model portfolio had a good May, despite headwinds from the strengthening dollar and declines in clean energy stocks in general.  As a whole, the model portfolio rose 2.2% for th...

Is Japan the Next Boom Market for the Geothermal Energy Industry?

Meg Cichon, Associate Editor As Japan continues to bounce back from the Fukushima nuclear disaster in 2011, it has focused on renewable energy to lessen its reliance on nuclear and carbon-heavy fossil fuels. In just two years, Japan installed more than...
Risk and reward

Managing the Risks of Renewable Energy Projects in Developing Countries

Jeffrey Karp, Jim Wrathall and Morgan Gerard, Sullivan & Worcester Driven by rapid expansion in developing countries, renewables are becoming a significant source of the world’s power.  According to the United Nations Environmental Programme’s (UNEP) 9th “Global Trends in Renewable En...
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 3
1505REW_C11

STAY CONNECTED

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

SOCIAL ACTIVITY

Tweet the Editors! @megcichon @jennrunyon

FEATURED PARTNERS



EVENTS

RECAM WEEK

RECAM WEEK will bring together the incredibly successful SPG Central Am...

CIREC WEEK

Chile is still considered to be one of the world’s hottest m...

Renewables and Mining Summit and Exhibition

African mining leaders are seriously exploring new energy solutions to s...

COMPANY BLOGS

Net Zero Energy Efficient Buildings and Geothermal Heat Pumps

As the U.S. market for green building design and construction evolves, ...

Clean Energy Patents Rise in 2014, Solar Tops others, Toyota and GM...

U.S. patents for Clean Energy technologies in 2014 were again at an all ...

California Solar Installations Put 6 Gigawatts of Power Online

That’s according to figures from the California Independent System...

NEWSLETTERS

Renewable Energy: Subscribe Now

Solar Energy: Subscribe Now

Wind Energy: Subscribe Now

Geothermal Energy: Subscribe Now

Bioenergy: Subscribe Now  

 

FEATURED PARTNERS