Nevada Geothermal Power Inc., an experienced renewable energy producer focusing on the development of clean electrical power from high temperature geothermal resources in the United States, similar to companies like U.S. Geothermal Inc. and Ormat Technologies Inc., could be set to move higher following the relative outperformance of the geothermal industry relative to the S&P 500.
Geothermal stocks have been outperforming the S&P 500 over the past month, according to data from Tickerspy. The sector has jumped more than 15% over the past month, which is nearly 14% better than the benchmark index. Ormat jumped more than 60% over the past month, while U.S. Geothermal increased 16.2% over the same time period. While Nevada Geothermal hasn’t seen an increase yet, the sector’s move higher could end up increasing its own valuation.
Undervalued on a Price-to-Sales Ratio
The price to sales ratio is a common relative valuation method used to measure how much investors are paying for a company’s sales. While it’s not the perfect indicator in all cases, investors tend to consider it when a company has yet to report a net income. The ratio is calculated by dividing a company’s share price by its revenue per share.
In the geothermal sector, Nevada Geothermal trades with the lowest price to sales ratio at just 0.39x, according to Yahoo! Finance estimates. Compared to Ormat’s 2.01x ratio or U.S. Geothermal’s nearly 16x ratio, this figure could indicate that the company is relatively undervalued compared to its industry peers.
Tough Quarter Presents Opportunity
Nevada Geothermal recently reported a tough quarter ended December 31, 2011. The company’s sales feel 12% after its output was hit by an auxiliary pump failure and the resulting outage of three power modules. In addition, production is currently limited while awaiting results of the current program of well field stimulation, optimization and testing.
These results negatively impacted the company’s share price, but the impact may have made the stock relatively oversold. After all, there are many positive developments, including potential strategic alternatives to recapitalize the company and positive preliminary indications from the company’s work at the Crump Geyser joint venture.
About Nevada Geothermal Inc.
Nevada Geothermal Power Inc. is an experienced renewable energy producer focusing on the development of CLEAN electrical power from high temperature geothermal resources in the United States. NGP currently owns a 100% leasehold interest in several properties in Nevada and California, and a 50% interest in Crump Geyser, in Oregon. Please visit the Nevada Geothermal Power Inc. website to learn more.