Intrinsic value of Omega Flex - OFLX

Previous Close

$56.90

  Intrinsic Value

$89.48

stock screener

  Rating & Target

str. buy

+57%

  Value-price divergence*

0%

Previous close

$56.90

 
Intrinsic value

$89.48

 
Up/down potential

+57%

 
Rating

str. buy

 
Value-price divergence*

0%

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

We calculate the intrinsic value of OFLX 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 0.6

 

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, %
  1.08
  23.80
  21.92
  20.23
  18.71
  17.33
  16.10
  14.99
  13.99
  13.09
  12.28
  11.56
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
Revenue, $m
  94
  116
  142
  171
  202
  238
  276
  317
  362
  409
  459
  512
  568
  627
  688
  752
  819
  888
  960
  1,035
  1,113
  1,194
  1,279
  1,366
  1,457
  1,552
  1,651
  1,753
  1,860
  1,972
  2,088
Variable operating expenses, $m
 
  88
  107
  128
  152
  179
  207
  239
  272
  307
  345
  385
  426
  470
  516
  564
  615
  667
  721
  777
  836
  897
  960
  1,026
  1,094
  1,165
  1,239
  1,316
  1,397
  1,480
  1,567
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
  72
  88
  107
  128
  152
  179
  207
  239
  272
  307
  345
  385
  426
  470
  516
  564
  615
  667
  721
  777
  836
  897
  960
  1,026
  1,094
  1,165
  1,239
  1,316
  1,397
  1,480
  1,567
Operating income, $m
  22
  29
  35
  42
  50
  59
  68
  79
  90
  102
  114
  128
  142
  156
  171
  187
  204
  221
  239
  258
  278
  298
  319
  341
  363
  387
  411
  437
  464
  491
  520
EBITDA, $m
  22
  30
  36
  43
  51
  60
  70
  81
  92
  104
  117
  130
  144
  159
  175
  191
  208
  226
  244
  263
  283
  303
  325
  347
  370
  394
  419
  445
  473
  501
  530
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  4
  4
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  14
  15
  16
  17
Earnings before tax, $m
  22
  29
  35
  42
  49
  58
  67
  77
  88
  99
  111
  124
  138
  152
  166
  182
  198
  215
  232
  250
  269
  288
  309
  330
  351
  374
  398
  423
  448
  475
  503
Tax expense, $m
  7
  8
  9
  11
  13
  16
  18
  21
  24
  27
  30
  34
  37
  41
  45
  49
  53
  58
  63
  68
  73
  78
  83
  89
  95
  101
  107
  114
  121
  128
  136
Net income, $m
  14
  21
  25
  30
  36
  42
  49
  56
  64
  72
  81
  91
  101
  111
  122
  133
  144
  157
  169
  183
  196
  210
  225
  241
  257
  273
  290
  308
  327
  347
  367

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  35
  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
  45
  54
  65
  78
  91
  106
  121
  138
  157
  176
  196
  218
  240
  263
  288
  313
  340
  368
  397
  426
  457
  490
  523
  558
  594
  632
  672
  712
  755
  800
Adjusted assets (=assets-cash), $m
  36
  45
  54
  65
  78
  91
  106
  121
  138
  157
  176
  196
  218
  240
  263
  288
  313
  340
  368
  397
  426
  457
  490
  523
  558
  594
  632
  672
  712
  755
  800
Revenue / Adjusted assets
  2.611
  2.578
  2.630
  2.631
  2.590
  2.615
  2.604
  2.620
  2.623
  2.605
  2.608
  2.612
  2.606
  2.613
  2.616
  2.611
  2.617
  2.612
  2.609
  2.607
  2.613
  2.613
  2.610
  2.612
  2.611
  2.613
  2.612
  2.609
  2.612
  2.612
  2.610
Average production assets, $m
  5
  6
  7
  8
  10
  11
  13
  15
  17
  20
  22
  25
  27
  30
  33
  36
  39
  43
  46
  50
  53
  57
  61
  66
  70
  75
  79
  84
  89
  95
  100
Working capital, $m
  37
  2
  3
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  16
  17
  19
  20
  22
  23
  25
  27
  29
  31
  33
  35
  37
  39
  41
  44
Total debt, $m
  0
  6
  13
  20
  29
  38
  48
  59
  71
  84
  97
  111
  126
  142
  158
  175
  193
  211
  230
  250
  271
  292
  315
  338
  362
  388
  414
  441
  469
  499
  530
Total liabilities, $m
  25
  31
  38
  45
  54
  63
  73
  84
  96
  109
  122
  136
  151
  167
  183
  200
  218
  236
  255
  275
  296
  317
  340
  363
  387
  413
  439
  466
  494
  524
  555
Total equity, $m
  46
  14
  17
  20
  24
  28
  32
  37
  42
  48
  54
  60
  67
  73
  81
  88
  96
  104
  113
  121
  130
  140
  150
  160
  171
  182
  193
  205
  218
  231
  245
Total liabilities and equity, $m
  71
  45
  55
  65
  78
  91
  105
  121
  138
  157
  176
  196
  218
  240
  264
  288
  314
  340
  368
  396
  426
  457
  490
  523
  558
  595
  632
  671
  712
  755
  800
Debt-to-equity ratio
  0.000
  0.430
  0.760
  1.020
  1.210
  1.370
  1.490
  1.600
  1.680
  1.750
  1.800
  1.850
  1.890
  1.930
  1.960
  1.980
  2.010
  2.030
  2.050
  2.060
  2.080
  2.090
  2.100
  2.110
  2.120
  2.130
  2.140
  2.150
  2.150
  2.160
  2.170
Adjusted equity ratio
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306
  0.306

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  14
  21
  25
  30
  36
  42
  49
  56
  64
  72
  81
  91
  101
  111
  122
  133
  144
  157
  169
  183
  196
  210
  225
  241
  257
  273
  290
  308
  327
  347
  367
Depreciation, amort., depletion, $m
  0
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
Funds from operations, $m
  14
  22
  26
  32
  37
  44
  51
  58
  66
  75
  84
  93
  103
  114
  125
  136
  148
  161
  174
  187
  202
  216
  231
  247
  264
  281
  298
  317
  336
  356
  377
Change in working capital, $m
  -1
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
Cash from operations, $m
  15
  21
  26
  31
  37
  43
  50
  57
  65
  74
  83
  92
  102
  113
  124
  135
  147
  159
  172
  186
  200
  214
  230
  245
  262
  279
  296
  315
  334
  354
  375
Maintenance CAPEX, $m
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
New CAPEX, $m
  0
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
Cash from investing activities, $m
  0
  -1
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -9
  -9
  -9
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
Free cash flow, $m
  15
  20
  24
  29
  34
  40
  47
  54
  62
  70
  78
  87
  97
  107
  118
  129
  140
  152
  165
  178
  191
  205
  220
  235
  251
  267
  284
  302
  320
  340
  360
Issuance/(repayment) of debt, $m
  0
  6
  7
  8
  8
  9
  10
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
Issuance/(repurchase) of shares, $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
Cash from financing (excl. dividends), $m  
  0
  6
  7
  8
  8
  9
  10
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  22
  23
  24
  25
  26
  27
  28
  30
  31
Total cash flow (excl. dividends), $m
  14
  26
  31
  37
  43
  50
  57
  65
  73
  82
  92
  101
  112
  123
  134
  146
  158
  171
  184
  198
  212
  227
  242
  258
  275
  292
  310
  329
  349
  369
  390
Retained Cash Flow (-), $m
  -5
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
Prev. year cash balance distribution, $m
 
  35
  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
 
  58
  28
  33
  39
  46
  53
  60
  68
  77
  86
  95
  105
  116
  127
  138
  150
  163
  175
  189
  203
  217
  232
  248
  264
  281
  299
  317
  336
  356
  377
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
 
  56
  26
  29
  32
  35
  38
  41
  43
  44
  45
  45
  45
  44
  43
  41
  38
  35
  32
  29
  26
  22
  19
  16
  13
  11
  9
  7
  5
  4
  3
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
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Omega Flex, Inc., together with its subsidiaries, manufactures and sells flexible metal hoses and accessories primarily in the United States and internationally. Its principal product includes flexible gas piping, which is used in residential and commercial buildings. The company sells its products under the TracPipe, CounterStrike, DoubleTrac, AutoFlare, DEF-Trac, SolarTrac, and AutoSnap brand names. It serves various markets, including construction, manufacturing, transportation, petrochemical, pharmaceutical, and other industries. The company sells its products through independent sales representatives, distributors, original equipment manufacturers, and direct sales, as well as sales through its Website. The company was formerly known as Tofle America, Inc. and changed its name to Omega Flex, Inc. in 1996. Omega Flex, Inc. was founded in 1975 and is based in Exton, Pennsylvania.

FINANCIAL RATIOS  of  Omega Flex (OFLX)

Valuation Ratios
P/E Ratio 41
Price to Sales 6.1
Price to Book 12.5
Price to Tangible Book
Price to Cash Flow 38.3
Price to Free Cash Flow 38.3
Growth Rates
Sales Growth Rate 1.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 20.4%
Ret/ On Assets - 3 Yr. Avg. 24.8%
Return On Total Capital 32.2%
Ret/ On T. Cap. - 3 Yr. Avg. 39.4%
Return On Equity 32.2%
Return On Equity - 3 Yr. Avg. 39.4%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 61.7%
Gross Margin - 3 Yr. Avg. 60.6%
EBITDA Margin 23.4%
EBITDA Margin - 3 Yr. Avg. 24.6%
Operating Margin 23.4%
Oper. Margin - 3 Yr. Avg. 23.9%
Pre-Tax Margin 23.4%
Pre-Tax Margin - 3 Yr. Avg. 24.6%
Net Profit Margin 14.9%
Net Profit Margin - 3 Yr. Avg. 15.8%
Effective Tax Rate 31.8%
Eff/ Tax Rate - 3 Yr. Avg. 32.8%
Payout Ratio 64.3%

OFLX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OFLX stock intrinsic value calculation we used $94 million for the last fiscal year's total revenue generated by Omega Flex. The default revenue input number comes from 2016 income statement of Omega Flex. 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 OFLX stock valuation model: a) initial revenue growth rate of 23.8% 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 OFLX is calculated based on our internal credit rating of Omega Flex, 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 Omega Flex.
    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 OFLX stock the variable cost ratio is equal to 75.5%.

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 OFLX 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 Omega Flex.

Corporate tax rate of 27% is the nominal tax rate for Omega Flex. 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 OFLX 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 OFLX are equal to 4.8%.

Life of production assets of 10 years is the average useful life of capital assets used in Omega Flex 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 OFLX is equal to 2.1%. 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 Omega Flex - 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 9.855 million for Omega Flex 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 Omega Flex at the current share price and the inputted number of shares is $0.6 billion.

RELATED COMPANIES Price Int.Val. Rating
NWPX Northwest Pipe 15.45 5.59  str.sell
WMS Advanced Drain 19.40 11.38  sell
VMI Valmont Indust 147.50 64.05  str.sell

COMPANY NEWS

▶ Omega Flex posts 2Q profit   [Jul-20-17 09:32PM  Associated Press]
▶ ETFs with exposure to Omega Flex, Inc. : July 11, 2017   [Jul-11-17 02:52PM  Capital Cube]
▶ ETFs with exposure to Omega Flex, Inc. : June 19, 2017   [Jun-19-17 03:52PM  Capital Cube]
▶ Omega Flex, Inc. Announces Intention to Launch New Product   [Jun-12-17 04:30PM  GlobeNewswire]
▶ Omega Flex, Inc. Announces Quarterly Dividend   [Jun-09-17 04:20PM  GlobeNewswire]
▶ Omega Flex posts 1Q profit   [Apr-20-17 04:40PM  Associated Press]
▶ Omega Flex posts 4Q profit   [Feb-10-17 04:42PM  Associated Press]
▶ Omega Flex, Inc. Announces Special Dividend   [Dec-14-16 04:34PM  GlobeNewswire]
▶ Omega Flex: A Play on the Housing Market   [01:32PM  GuruFocus.com]
▶ ETFs with exposure to Omega Flex, Inc. : August 23, 2016   [Aug-23-16 12:15PM  Capital Cube]
▶ Omega Flex, Inc. Announces a Special Dividend Issued   [Dec-10  05:00PM  GlobeNewswire]
▶ An Undiscovered Growth Stock for Your Portfolio   [Oct-20  02:01PM  at Investopedia]
▶ 10-Q for Omega Flex, Inc.   [Aug-10  08:13PM  at Company Spotlight]
▶ 10-Q for Omega Flex, Inc.   [May-11  08:12PM  at Company Spotlight]
▶ 10-K for Omega Flex, Inc.   [May-05  08:12PM  at Company Spotlight]
▶ Omega Flex Announces Special Dividend to Shareholders   [Dec-10  05:03PM  GlobeNewswire]
Stock chart of OFLX Financial statements of OFLX
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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