Intrinsic value of Omega Protein - OME

Previous Close

$22.05

  Intrinsic Value

$35.56

stock screener

  Rating & Target

str. buy

+61%

  Value-price divergence*

+292%

Previous close

$22.05

 
Intrinsic value

$35.56

 
Up/down potential

+61%

 
Rating

str. buy

 
Value-price divergence*

+292%

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

We calculate the intrinsic value of OME 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 0.5

 

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, %
  8.91
  8.90
  8.51
  8.16
  7.84
  7.56
  7.30
  7.07
  6.87
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.59
  5.53
  5.47
  5.43
  5.38
  5.35
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
Revenue, $m
  391
  426
  462
  500
  539
  580
  622
  666
  712
  759
  809
  860
  914
  969
  1,027
  1,088
  1,151
  1,217
  1,286
  1,358
  1,433
  1,511
  1,593
  1,679
  1,769
  1,863
  1,961
  2,064
  2,172
  2,285
  2,403
Variable operating expenses, $m
 
  252
  274
  296
  319
  342
  367
  393
  420
  448
  477
  504
  536
  568
  602
  638
  675
  714
  754
  796
  840
  886
  934
  984
  1,037
  1,092
  1,150
  1,210
  1,273
  1,340
  1,409
Fixed operating expenses, $m
 
  111
  113
  116
  119
  122
  125
  128
  132
  135
  138
  142
  145
  149
  153
  156
  160
  164
  168
  173
  177
  181
  186
  191
  195
  200
  205
  210
  216
  221
  227
Total operating expenses, $m
  337
  363
  387
  412
  438
  464
  492
  521
  552
  583
  615
  646
  681
  717
  755
  794
  835
  878
  922
  969
  1,017
  1,067
  1,120
  1,175
  1,232
  1,292
  1,355
  1,420
  1,489
  1,561
  1,636
Operating income, $m
  54
  63
  75
  88
  101
  115
  129
  145
  160
  177
  194
  214
  233
  252
  272
  294
  316
  339
  363
  389
  416
  444
  473
  504
  536
  570
  606
  643
  683
  724
  768
EBITDA, $m
  80
  90
  104
  119
  135
  151
  168
  185
  204
  223
  243
  264
  285
  308
  332
  356
  382
  409
  437
  467
  498
  531
  565
  600
  638
  677
  719
  762
  808
  856
  906
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
Earnings before tax, $m
  51
  63
  75
  87
  100
  114
  128
  143
  158
  174
  191
  211
  229
  248
  268
  289
  310
  333
  357
  382
  408
  435
  464
  494
  526
  559
  594
  631
  669
  710
  752
Tax expense, $m
  18
  17
  20
  24
  27
  31
  35
  39
  43
  47
  51
  57
  62
  67
  72
  78
  84
  90
  96
  103
  110
  118
  125
  133
  142
  151
  160
  170
  181
  192
  203
Net income, $m
  33
  46
  55
  64
  73
  83
  93
  104
  115
  127
  139
  154
  167
  181
  195
  211
  226
  243
  260
  279
  298
  318
  339
  361
  384
  408
  434
  460
  489
  518
  549

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  37
  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
  428
  426
  462
  500
  539
  580
  622
  666
  712
  759
  809
  860
  914
  969
  1,027
  1,088
  1,151
  1,217
  1,286
  1,358
  1,433
  1,511
  1,593
  1,679
  1,769
  1,863
  1,961
  2,064
  2,172
  2,285
  2,403
Adjusted assets (=assets-cash), $m
  391
  426
  462
  500
  539
  580
  622
  666
  712
  759
  809
  860
  914
  969
  1,027
  1,088
  1,151
  1,217
  1,286
  1,358
  1,433
  1,511
  1,593
  1,679
  1,769
  1,863
  1,961
  2,064
  2,172
  2,285
  2,403
Revenue / Adjusted assets
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
Average production assets, $m
  203
  221
  239
  259
  279
  300
  322
  345
  369
  393
  419
  446
  473
  502
  532
  564
  596
  630
  666
  703
  742
  783
  825
  870
  916
  965
  1,016
  1,069
  1,125
  1,183
  1,245
Working capital, $m
  134
  107
  116
  125
  135
  145
  156
  167
  179
  191
  203
  216
  229
  243
  258
  273
  289
  305
  323
  341
  360
  379
  400
  421
  444
  467
  492
  518
  545
  573
  603
Total debt, $m
  1
  8
  16
  25
  34
  43
  53
  63
  74
  85
  96
  108
  120
  133
  146
  160
  175
  190
  206
  222
  240
  258
  276
  296
  317
  338
  361
  385
  409
  435
  463
Total liabilities, $m
  91
  98
  106
  115
  124
  133
  143
  153
  164
  175
  186
  198
  210
  223
  236
  250
  265
  280
  296
  312
  330
  348
  366
  386
  407
  428
  451
  475
  499
  525
  553
Total equity, $m
  337
  328
  356
  385
  415
  446
  479
  513
  548
  585
  623
  662
  704
  746
  791
  838
  886
  937
  990
  1,045
  1,103
  1,164
  1,227
  1,293
  1,362
  1,434
  1,510
  1,589
  1,672
  1,759
  1,850
Total liabilities and equity, $m
  428
  426
  462
  500
  539
  579
  622
  666
  712
  760
  809
  860
  914
  969
  1,027
  1,088
  1,151
  1,217
  1,286
  1,357
  1,433
  1,512
  1,593
  1,679
  1,769
  1,862
  1,961
  2,064
  2,171
  2,284
  2,403
Debt-to-equity ratio
  0.003
  0.020
  0.050
  0.060
  0.080
  0.100
  0.110
  0.120
  0.130
  0.140
  0.150
  0.160
  0.170
  0.180
  0.180
  0.190
  0.200
  0.200
  0.210
  0.210
  0.220
  0.220
  0.230
  0.230
  0.230
  0.240
  0.240
  0.240
  0.240
  0.250
  0.250
Adjusted equity ratio
  0.767
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770
  0.770

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  33
  46
  55
  64
  73
  83
  93
  104
  115
  127
  139
  154
  167
  181
  195
  211
  226
  243
  260
  279
  298
  318
  339
  361
  384
  408
  434
  460
  489
  518
  549
Depreciation, amort., depletion, $m
  26
  27
  29
  31
  34
  36
  38
  41
  44
  46
  49
  50
  53
  56
  59
  63
  66
  70
  74
  78
  82
  87
  92
  97
  102
  107
  113
  119
  125
  131
  138
Funds from operations, $m
  112
  73
  84
  95
  107
  119
  132
  145
  159
  173
  188
  203
  220
  237
  255
  273
  293
  313
  334
  357
  380
  405
  430
  457
  486
  515
  546
  579
  614
  650
  687
Change in working capital, $m
  18
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
Cash from operations, $m
  94
  64
  75
  86
  97
  109
  121
  134
  147
  161
  176
  190
  206
  223
  240
  258
  277
  297
  317
  339
  361
  385
  410
  436
  463
  492
  522
  553
  586
  621
  658
Maintenance CAPEX, $m
  0
  -23
  -25
  -27
  -29
  -31
  -33
  -36
  -38
  -41
  -44
  -47
  -50
  -53
  -56
  -59
  -63
  -66
  -70
  -74
  -78
  -82
  -87
  -92
  -97
  -102
  -107
  -113
  -119
  -125
  -131
New CAPEX, $m
  -36
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -42
  -44
  -46
  -49
  -51
  -53
  -56
  -59
  -61
Cash from investing activities, $m
  -36
  -41
  -44
  -47
  -49
  -52
  -55
  -59
  -62
  -66
  -70
  -74
  -78
  -82
  -86
  -90
  -96
  -100
  -106
  -111
  -117
  -123
  -129
  -136
  -143
  -151
  -158
  -166
  -175
  -184
  -192
Free cash flow, $m
  58
  24
  31
  39
  48
  57
  66
  75
  85
  96
  107
  117
  129
  141
  154
  168
  182
  196
  212
  228
  244
  262
  280
  300
  320
  341
  364
  387
  412
  438
  465
Issuance/(repayment) of debt, $m
  -23
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
Issuance/(repurchase) of shares, $m
  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
Cash from financing (excl. dividends), $m  
  -21
  8
  8
  9
  9
  9
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
Total cash flow (excl. dividends), $m
  37
  32
  40
  48
  57
  66
  76
  86
  96
  107
  118
  129
  141
  154
  167
  181
  196
  211
  227
  244
  262
  280
  299
  319
  341
  363
  386
  411
  437
  464
  492
Retained Cash Flow (-), $m
  -42
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -63
  -66
  -69
  -72
  -76
  -79
  -83
  -87
  -91
Prev. year cash balance distribution, $m
 
  36
  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
 
  41
  12
  19
  27
  35
  43
  52
  61
  70
  80
  89
  100
  111
  123
  135
  147
  161
  174
  189
  204
  220
  236
  253
  272
  291
  311
  332
  354
  377
  401
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
 
  39
  11
  17
  22
  27
  31
  35
  38
  40
  42
  42
  43
  42
  41
  40
  37
  35
  32
  29
  26
  23
  20
  17
  14
  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
  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
  100.0
  100.0

Omega Protein Corporation is a nutritional products company that develops, produces and delivers nutritious products. The Company operates through two segments: animal nutrition and human nutrition. The Company's animal nutrition segment consists of two subsidiaries: Omega Protein, Inc. (Omega Protein) and Omega Shipyard, Inc. (Omega Shipyard). Omega Protein, the Company's principal operating subsidiary, is dedicated to the production of animal nutrition products and operates in the menhaden harvesting and processing business. The Company Human Nutrition segment does business under the name Bioriginal, which includes all of the human nutrition businesses except the tera's branded products. Bioriginal has three primary product lines: specialty oils, protein products and other nutraceutical ingredients. The human nutrition business consists of Cyvex Nutrition, Inc. (Cyvex), Wisconsin Specialty Protein, L.L.C. (WSP), and Bioriginal Food & Science Corp. (Bioriginal Food & Science).

FINANCIAL RATIOS  of  Omega Protein (OME)

Valuation Ratios
P/E Ratio 15
Price to Sales 1.3
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 5.3
Price to Free Cash Flow 8.5
Growth Rates
Sales Growth Rate 8.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 2.9%
Cap. Spend. - 3 Yr. Gr. Rate 3.7%
Financial Strength
Quick Ratio 37
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 7.9%
Ret/ On Assets - 3 Yr. Avg. 6.6%
Return On Total Capital 10%
Ret/ On T. Cap. - 3 Yr. Avg. 8%
Return On Equity 10.4%
Return On Equity - 3 Yr. Avg. 8.7%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 29.2%
Gross Margin - 3 Yr. Avg. 27.3%
EBITDA Margin 19.7%
EBITDA Margin - 3 Yr. Avg. 18.5%
Operating Margin 13.8%
Oper. Margin - 3 Yr. Avg. 11.9%
Pre-Tax Margin 13%
Pre-Tax Margin - 3 Yr. Avg. 11.2%
Net Profit Margin 8.4%
Net Profit Margin - 3 Yr. Avg. 7%
Effective Tax Rate 35.3%
Eff/ Tax Rate - 3 Yr. Avg. 37.9%
Payout Ratio 0%

OME stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OME stock intrinsic value calculation we used $391 million for the last fiscal year's total revenue generated by Omega Protein. The default revenue input number comes from 2016 income statement of Omega Protein. 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 OME stock valuation model: a) initial revenue growth rate of 8.9% 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 OME is calculated based on our internal credit rating of Omega Protein, 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 Protein.
    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 OME stock the variable cost ratio is equal to 59.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $108 million in the base year in the intrinsic value calculation for OME 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 Protein.

Corporate tax rate of 27% is the nominal tax rate for Omega Protein. 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 OME 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 OME are equal to 51.8%.

Life of production assets of 9 years is the average useful life of capital assets used in Omega Protein 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 OME is equal to 25.1%. 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 - $337 million for Omega Protein - 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 22.184 million for Omega Protein 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 Protein at the current share price and the inputted number of shares is $0.5 billion.

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COMPANY NEWS

▶ Company News For Oct 9, 2017   [09:27AM  Zacks]
▶ Canada's Cooke Lands Whopper With Omega Protein   [Oct-07-17 08:00AM  TheStreet.com]
▶ Costco and Hess slide while Omega Protein climbs   [04:29PM  Associated Press]
▶ Omega Protein posts 2Q profit   [Aug-02-17 11:13PM  Associated Press]
▶ Omega Protein Declares Quarterly Dividend   [Aug-01-17 08:00AM  PR Newswire]
▶ ETFs with exposure to Omega Protein Corp. : July 12, 2017   [Jul-12-17 02:51PM  Capital Cube]
▶ Biotech Movers: Exelixis, Omeros, Inovio   [Jul-10-17 09:40AM  TheStreet.com]
▶ ETFs with exposure to Omega Protein Corp. : June 13, 2017   [Jun-13-17 12:48PM  Capital Cube]
▶ ETFs with exposure to Omega Protein Corp. : June 2, 2017   [Jun-02-17 02:22PM  Capital Cube]
▶ Omega Protein posts 1Q profit   [May-08-17 04:22PM  Associated Press]
▶ Omega Protein Declares Quarterly Dividend   [08:00AM  PR Newswire]
Financial statements of OME
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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