Ormat Technologies (NYSE:ORA) vs. Covanta (CVA) Critical Survey

Ormat Technologies (NYSE: ORA) and Covanta (NYSE:CVA) are both oils/energy companies, but which is the better business? We will compare the two companies based on the strength of their risk, analyst recommendations, earnings, profitability, institutional ownership, dividends and valuation.

Dividends

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Ormat Technologies pays an annual dividend of $0.92 per share and has a dividend yield of 1.7%. Covanta pays an annual dividend of $1.00 per share and has a dividend yield of 6.8%. Ormat Technologies pays out 30.8% of its earnings in the form of a dividend. Covanta pays out -270.3% 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. Covanta is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk and Volatility

Ormat Technologies has a beta of 1.37, meaning that its stock price is 37% more volatile than the S&P 500. Comparatively, Covanta has a beta of 0.7, meaning that its stock price is 30% less volatile than the S&P 500.

Insider & Institutional Ownership

70.6% of Ormat Technologies shares are held by institutional investors. Comparatively, 91.7% of Covanta shares are held by institutional investors. 0.5% of Ormat Technologies shares are held by company insiders. Comparatively, 11.6% of Covanta shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Profitability

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

Net Margins Return on Equity Return on Assets
Ormat Technologies 22.44% 12.15% 6.02%
Covanta 3.25% -13.02% -1.10%

Valuation and Earnings

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ormat Technologies $692.81 million 4.03 $155.48 million $2.99 18.46
Covanta $1.75 billion 1.11 $57.00 million ($0.37) -40.00

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

Analyst Ratings

This is a summary of current ratings and recommmendations for Ormat Technologies and Covanta, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ormat Technologies 0 3 4 0 2.57
Covanta 0 2 5 0 2.71

Ormat Technologies presently has a consensus price target of $67.17, indicating a potential upside of 21.66%. Covanta has a consensus price target of $17.29, indicating a potential upside of 16.80%. Given Ormat Technologies’ higher possible upside, equities analysts plainly believe Ormat Technologies is more favorable than Covanta.

Summary

Ormat Technologies beats Covanta on 9 of the 16 factors compared between the two stocks.

Ormat Technologies Company Profile

Ormat Technologies, Inc. engages in the geothermal and recovered energy power business worldwide. The company operates through Electricity and Product segments. The Electricity segment develops, builds, owns, and operates geothermal and recovered energy-based power plants; and sells electricity. This segment also offers energy storage, demand response, and energy management related services. The Product segment designs, manufactures, and sells equipment for geothermal and recovered energy-based electricity generation, such as fossil fuel powered turbo-generators and heavy duty direct-current generators. This segment also provides services relating to the engineering, procurement, construction, operation, and maintenance of geothermal and recovered energy-based power plants. The Product segment serves contractors; developers, owners, and operators of geothermal power plants; and owners and operators of interstate natural gas pipelines, gas processing plants, and cement plants, as well as companies in other energy-intensive industrial processes. Ormat Technologies, Inc. was founded in 1965 and is based in Reno, Nevada.

Covanta Company Profile

Covanta Holding Corporation, through its subsidiaries, provides waste and energy services to municipal entities primarily in the United States and Canada. It owns and operates infrastructure for the conversion of waste to energy, as well as engages in related waste transport and disposal, and other renewable energy production businesses. The company disposes waste and generates electricity and/or steam; sells metal recovered during the energy-from-waste (EfW) process; and offers waste management solutions, such as site clean-up, wastewater treatment, transportation and logistics, recycling, and depackaging. It owns and operates 43 EfW facilities; and 5 additional energy generation facilities, including wood biomass and hydroelectric renewable energy production facilities in North America. The company also owns and operates 17 transfer stations, 19 material processing facilities, 1 regional metals recycling facility, and 4 landfills. Covanta Holding Corporation has a strategic partnership with the Green Investment Group Limited to develop, fund, and own EfW projects in Ireland and the United Kingdom. The company was formerly known as Danielson Holding Corporation and changed its name to Covanta Holding Corporation in September 2005. Covanta Holding Corporation was founded in 1960 and is headquartered in Morristown, New Jersey.

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