Intrinsic Value Ormat Technologies, Inc. (ORA)

• Previous Close: $124.94
• Intrinsic Value: $28.70
• Upside potential: -77%

Stock Valuation Context

Business Model And Market Position

Ormat Technologies, Inc. is a leading geothermal energy company specializing in the development, ownership, and operation of renewable power plants. The company operates across three segments: electricity generation, energy storage, and product sales, with geothermal remaining its core revenue driver. Ormat leverages proprietary technology to enhance efficiency in geothermal and recovered energy generation, positioning itself as a key player in the transition to sustainable energy. Its diversified portfolio includes operations in the U.S., Kenya, Guatemala, and other international markets, providing stable, long-term contracted cash flows. The company’s vertically integrated model—spanning exploration, development, and operations—grants it a competitive edge in cost control and scalability. Ormat’s focus on innovation and grid stability through energy storage solutions further strengthens its market position in the renewable sector, where policy tailwinds and decarbonization trends support growth.

Revenue Profitability And Efficiency

In FY 2024, Ormat reported revenue of $879.7 million, with net income of $123.7 million, reflecting a net margin of approximately 14.1%. Diluted EPS stood at $2.04, supported by disciplined cost management and operational leverage. Operating cash flow reached $410.9 million, though capital expenditures of $487.7 million indicate heavy reinvestment into capacity expansion and technology upgrades, typical for capital-intensive renewable energy firms.

Earnings Power And Capital Efficiency

Ormat’s earnings power is underpinned by long-term power purchase agreements (PPAs), ensuring predictable cash flows. The company’s capital efficiency is moderated by high upfront development costs, but its asset-light product segment and recurring revenue streams from electricity generation mitigate risks. Operating cash flow coverage of capital expenditures suggests a balanced approach to growth and liquidity, though leverage remains a consideration.

Balance Sheet And Financial Health

Ormat’s balance sheet shows $205.8 million in cash against $2.45 billion in total debt, reflecting a leveraged but manageable position given its contracted revenue base. The debt load aligns with industry norms for infrastructure-heavy renewables firms, and the company’s ability to generate steady cash flows supports its financial stability. Liquidity appears adequate, with no immediate refinancing risks evident.

Growth Trends And Dividend Policy

Ormat has demonstrated consistent growth through capacity additions and geographic diversification. Its dividend of $0.48 per share offers a modest yield, prioritizing reinvestment over shareholder payouts. Future growth is likely tied to global renewable energy adoption, with expansion opportunities in emerging markets and energy storage bolstering the pipeline.

Valuation And Market Expectations

The market values Ormat as a hybrid of utility stability and renewable growth potential. Its valuation reflects expectations for mid-single-digit revenue growth and margin expansion as newer projects come online. Comparables suggest investors price in regulatory support and execution risks inherent in geothermal development.

Strategic Advantages And Outlook

Ormat’s technological expertise and diversified revenue streams provide resilience against sector volatility. The outlook remains positive, driven by increasing demand for baseload renewable energy and storage solutions. Execution on its project backlog and cost discipline will be critical to maintaining its competitive position in a rapidly evolving energy landscape.

Sources

Company 10-K, investor presentations