Intrinsic value of Orion Energy Systems - OESX

Previous Close

$0.91

  Intrinsic Value

$0.40

stock screener

  Rating & Target

str. sell

-56%

  Value-price divergence*

-27%

Previous close

$0.91

 
Intrinsic value

$0.40

 
Up/down potential

-56%

 
Rating

str. sell

 
Value-price divergence*

-27%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of OESX stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -5.56
  23.50
  21.65
  19.99
  18.49
  17.14
  15.92
  14.83
  13.85
  12.96
  12.17
  11.45
  10.81
  10.22
  9.70
  9.23
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.02
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
Revenue, $m
  68
  84
  102
  123
  145
  170
  197
  226
  258
  291
  327
  364
  403
  445
  488
  533
  580
  629
  680
  732
  787
  844
  904
  965
  1,029
  1,096
  1,165
  1,238
  1,313
  1,391
  1,473
Variable operating expenses, $m
 
  121
  147
  177
  209
  245
  284
  326
  372
  420
  471
  525
  581
  641
  703
  768
  836
  906
  979
  1,055
  1,135
  1,217
  1,302
  1,391
  1,483
  1,579
  1,679
  1,783
  1,892
  2,005
  2,122
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  88
  121
  147
  177
  209
  245
  284
  326
  372
  420
  471
  525
  581
  641
  703
  768
  836
  906
  979
  1,055
  1,135
  1,217
  1,302
  1,391
  1,483
  1,579
  1,679
  1,783
  1,892
  2,005
  2,122
Operating income, $m
  -20
  -37
  -45
  -54
  -64
  -75
  -87
  -100
  -114
  -128
  -144
  -161
  -178
  -196
  -215
  -235
  -256
  -277
  -300
  -323
  -347
  -372
  -399
  -426
  -454
  -483
  -514
  -546
  -579
  -614
  -650
EBITDA, $m
  -16
  -34
  -41
  -50
  -59
  -69
  -80
  -92
  -104
  -118
  -132
  -147
  -163
  -180
  -198
  -216
  -235
  -255
  -275
  -297
  -319
  -342
  -366
  -391
  -417
  -444
  -472
  -501
  -532
  -563
  -597
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  8
  9
  10
  10
  11
  12
  13
  14
  14
  15
  16
Earnings before tax, $m
  -20
  -37
  -45
  -54
  -65
  -76
  -88
  -101
  -116
  -131
  -147
  -164
  -182
  -200
  -220
  -240
  -261
  -284
  -307
  -331
  -355
  -381
  -408
  -436
  -465
  -495
  -527
  -559
  -593
  -629
  -666
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -20
  -37
  -45
  -54
  -65
  -76
  -88
  -101
  -116
  -131
  -147
  -164
  -182
  -200
  -220
  -240
  -261
  -284
  -307
  -331
  -355
  -381
  -408
  -436
  -465
  -495
  -527
  -559
  -593
  -629
  -666

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  16
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  71
  68
  83
  99
  118
  138
  160
  183
  209
  236
  264
  295
  326
  360
  395
  431
  469
  509
  550
  593
  637
  683
  731
  781
  833
  887
  943
  1,001
  1,062
  1,126
  1,192
Adjusted assets (=assets-cash), $m
  55
  68
  83
  99
  118
  138
  160
  183
  209
  236
  264
  295
  326
  360
  395
  431
  469
  509
  550
  593
  637
  683
  731
  781
  833
  887
  943
  1,001
  1,062
  1,126
  1,192
Revenue / Adjusted assets
  1.236
  1.235
  1.229
  1.242
  1.229
  1.232
  1.231
  1.235
  1.234
  1.233
  1.239
  1.234
  1.236
  1.236
  1.235
  1.237
  1.237
  1.236
  1.236
  1.234
  1.235
  1.236
  1.237
  1.236
  1.235
  1.236
  1.235
  1.237
  1.236
  1.235
  1.236
Average production assets, $m
  25
  30
  37
  44
  52
  61
  71
  82
  93
  105
  118
  131
  145
  160
  176
  192
  209
  226
  245
  264
  283
  304
  325
  348
  371
  395
  420
  446
  473
  501
  530
Working capital, $m
  30
  19
  23
  27
  32
  38
  44
  50
  57
  64
  72
  80
  89
  98
  108
  118
  128
  139
  150
  162
  174
  187
  200
  213
  228
  242
  258
  274
  290
  307
  326
Total debt, $m
  1
  6
  12
  19
  27
  36
  46
  56
  67
  79
  91
  104
  118
  133
  148
  164
  181
  198
  216
  234
  254
  274
  295
  317
  339
  363
  387
  413
  439
  467
  496
Total liabilities, $m
  25
  30
  36
  43
  51
  60
  70
  80
  91
  103
  115
  128
  142
  157
  172
  188
  205
  222
  240
  258
  278
  298
  319
  341
  363
  387
  411
  437
  463
  491
  520
Total equity, $m
  46
  38
  47
  56
  66
  78
  90
  103
  118
  133
  149
  166
  184
  203
  223
  243
  265
  287
  310
  334
  359
  385
  412
  440
  470
  500
  532
  565
  599
  635
  672
Total liabilities and equity, $m
  71
  68
  83
  99
  117
  138
  160
  183
  209
  236
  264
  294
  326
  360
  395
  431
  470
  509
  550
  592
  637
  683
  731
  781
  833
  887
  943
  1,002
  1,062
  1,126
  1,192
Debt-to-equity ratio
  0.022
  0.150
  0.260
  0.340
  0.410
  0.460
  0.510
  0.540
  0.570
  0.590
  0.610
  0.630
  0.640
  0.650
  0.670
  0.670
  0.680
  0.690
  0.700
  0.700
  0.710
  0.710
  0.710
  0.720
  0.720
  0.730
  0.730
  0.730
  0.730
  0.740
  0.740
Adjusted equity ratio
  0.545
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564
  0.564

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -20
  -37
  -45
  -54
  -65
  -76
  -88
  -101
  -116
  -131
  -147
  -164
  -182
  -200
  -220
  -240
  -261
  -284
  -307
  -331
  -355
  -381
  -408
  -436
  -465
  -495
  -527
  -559
  -593
  -629
  -666
Depreciation, amort., depletion, $m
  4
  3
  4
  4
  5
  6
  7
  8
  9
  10
  12
  13
  15
  16
  18
  19
  21
  23
  24
  26
  28
  30
  33
  35
  37
  39
  42
  45
  47
  50
  53
Funds from operations, $m
  1
  -34
  -42
  -50
  -59
  -70
  -81
  -93
  -106
  -120
  -135
  -151
  -167
  -184
  -202
  -221
  -241
  -261
  -282
  -304
  -327
  -351
  -376
  -401
  -428
  -456
  -485
  -515
  -546
  -579
  -613
Change in working capital, $m
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  17
  17
  18
Cash from operations, $m
  -3
  -38
  -46
  -55
  -65
  -75
  -87
  -100
  -113
  -128
  -143
  -159
  -176
  -193
  -212
  -231
  -251
  -272
  -293
  -316
  -339
  -363
  -389
  -415
  -442
  -471
  -500
  -531
  -563
  -596
  -631
Maintenance CAPEX, $m
  0
  -2
  -3
  -4
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -12
  -13
  -15
  -16
  -18
  -19
  -21
  -23
  -24
  -26
  -28
  -30
  -33
  -35
  -37
  -39
  -42
  -45
  -47
  -50
New CAPEX, $m
  0
  -6
  -7
  -7
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
Cash from investing activities, $m
  0
  -8
  -10
  -11
  -12
  -14
  -16
  -18
  -19
  -21
  -23
  -25
  -27
  -30
  -32
  -34
  -36
  -39
  -41
  -43
  -46
  -49
  -51
  -55
  -58
  -61
  -64
  -68
  -72
  -75
  -79
Free cash flow, $m
  -3
  -46
  -55
  -66
  -77
  -90
  -103
  -117
  -133
  -149
  -166
  -184
  -203
  -223
  -243
  -265
  -287
  -310
  -334
  -359
  -385
  -412
  -440
  -470
  -500
  -532
  -564
  -599
  -634
  -672
  -710
Issuance/(repayment) of debt, $m
  -1
  6
  6
  7
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  24
  25
  27
  28
  29
Issuance/(repurchase) of shares, $m
  0
  44
  54
  64
  75
  87
  101
  115
  130
  146
  163
  181
  200
  219
  239
  261
  283
  306
  330
  355
  380
  407
  435
  464
  494
  526
  558
  592
  628
  665
  703
Cash from financing (excl. dividends), $m  
  -1
  50
  60
  71
  83
  96
  111
  125
  141
  158
  176
  194
  214
  234
  254
  277
  300
  323
  348
  374
  399
  427
  456
  486
  517
  550
  582
  617
  655
  693
  732
Total cash flow (excl. dividends), $m
  -4
  4
  5
  5
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
Retained Cash Flow (-), $m
  19
  -44
  -54
  -64
  -75
  -87
  -101
  -115
  -130
  -146
  -163
  -181
  -200
  -219
  -239
  -261
  -283
  -306
  -330
  -355
  -380
  -407
  -435
  -464
  -494
  -526
  -558
  -592
  -628
  -665
  -703
Prev. year cash balance distribution, $m
 
  15
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -25
  -49
  -58
  -69
  -81
  -93
  -107
  -122
  -137
  -154
  -171
  -189
  -208
  -228
  -249
  -270
  -293
  -316
  -341
  -366
  -392
  -420
  -448
  -477
  -508
  -540
  -573
  -608
  -644
  -682
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  -24
  -45
  -51
  -57
  -63
  -68
  -72
  -76
  -79
  -81
  -81
  -81
  -79
  -77
  -73
  -69
  -64
  -58
  -52
  -47
  -41
  -35
  -29
  -24
  -20
  -16
  -12
  -9
  -7
  -5
Current shareholders' claim on cash, %
  100
  32.9
  11.0
  3.7
  1.3
  0.4
  0.2
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Orion Energy Systems, Inc. researches, designs, develops, manufactures, implements, markets, and sells energy management systems for the commercial office and retail, area lighting, and industrial markets in North America. The company operates in three segments: Orion U.S. Markets Division, Orion Engineered Systems Division, and Orion Distribution Services Division. It offers LED Troffer Door Retrofit for use in office or retail grid ceilings; and LED interior high bay lighting products consisting of Apollo class of LED interior fixtures designed for new construction and retrofit projects, as well as offers ISON class of LED interior fixtures. The company also provides Orion ISON LED exterior area fixtures; Apollo LED exterior area lights; and Apollo LED wall packs for new construction and retrofit projects. In addition, it offers a range of smart building control systems that provide lighting control options and data intelligence capabilities for building managers under the InteLite brand, as well as procures from third parties; and various other LED, HIF, and induction fixtures for lighting and energy management needs, including fixtures for agribusinesses, parking lots, roadways, retail, mezzanine, outdoor applications, and private label resale. Further, the company provides lighting-related energy management services, such as site assessment, site field verification, utility incentive and government subsidy management, engineering design, project management, and installation. It serves customers directly, as well as through independent sales agencies and electrical distributors. Orion Energy Systems, Inc. was founded in 1996 and is headquartered in Manitowoc, Wisconsin.

FINANCIAL RATIOS  of  Orion Energy Systems (OESX)

Valuation Ratios
P/E Ratio -1.3
Price to Sales 0.4
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow -8.4
Price to Free Cash Flow -8.4
Growth Rates
Sales Growth Rate -5.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio 16
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 2.2%
Interest Coverage 0
Management Effectiveness
Return On Assets -25.2%
Ret/ On Assets - 3 Yr. Avg. -21.8%
Return On Total Capital -34.8%
Ret/ On T. Cap. - 3 Yr. Avg. -28%
Return On Equity -36%
Return On Equity - 3 Yr. Avg. -29.6%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 23.5%
Gross Margin - 3 Yr. Avg. 16%
EBITDA Margin -23.5%
EBITDA Margin - 3 Yr. Avg. -21.9%
Operating Margin -29.4%
Oper. Margin - 3 Yr. Avg. -27.6%
Pre-Tax Margin -29.4%
Pre-Tax Margin - 3 Yr. Avg. -27.6%
Net Profit Margin -29.4%
Net Profit Margin - 3 Yr. Avg. -26.9%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 8.3%
Payout Ratio 0%

OESX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OESX stock intrinsic value calculation we used $68 million for the last fiscal year's total revenue generated by Orion Energy Systems. The default revenue input number comes from 2016 income statement of Orion Energy Systems. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our OESX stock valuation model: a) initial revenue growth rate of 23.5% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for OESX is calculated based on our internal credit rating of Orion Energy Systems, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Orion Energy Systems.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of OESX stock the variable cost ratio is equal to 144.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for OESX stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Orion Energy Systems.

Corporate tax rate of 27% is the nominal tax rate for Orion Energy Systems. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the OESX stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for OESX are equal to 36%.

Life of production assets of 10 years is the average useful life of capital assets used in Orion Energy Systems operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for OESX is equal to 22.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $46 million for Orion Energy Systems - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 28.751 million for Orion Energy Systems is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Orion Energy Systems at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ [$$] Orion Energy Backs Future Energy Solutions With Credit Pact   [Apr-10-17 01:57PM  The Wall Street Journal]
▶ Weekly CFO Buys Highlights   [Feb-23-17 02:50PM  GuruFocus.com]
▶ Clow Valve Selects Orion for Iowa Facility Upgrade   [Jan-19-17 09:00AM  Business Wire]
▶ 10 Fresh Analyst Stocks Under $10 With Massive Upside Calls   [Jul-24-16 10:15AM  at 24/7 Wall St.]
Stock chart of OESX Financial statements of OESX
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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