Intrinsic value of Ormat Technologies - ORA

Previous Close

$66.58

  Intrinsic Value

$21.84

stock screener

  Rating & Target

str. sell

-67%

Previous close

$66.58

 
Intrinsic value

$21.84

 
Up/down potential

-67%

 
Rating

str. sell

We calculate the intrinsic value of ORA 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  11.43
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  663
  676
  692
  710
  730
  752
  776
  802
  831
  862
  895
  930
  968
  1,008
  1,051
  1,096
  1,144
  1,195
  1,249
  1,306
  1,366
  1,429
  1,496
  1,566
  1,640
  1,718
  1,801
  1,887
  1,978
  2,074
  2,175
Variable operating expenses, $m
 
  299
  306
  314
  322
  332
  343
  354
  367
  381
  395
  410
  427
  445
  463
  483
  505
  527
  551
  576
  602
  630
  660
  691
  723
  758
  794
  832
  872
  915
  959
Fixed operating expenses, $m
 
  176
  181
  185
  190
  195
  199
  204
  210
  215
  220
  226
  231
  237
  243
  249
  255
  262
  268
  275
  282
  289
  296
  304
  311
  319
  327
  335
  343
  352
  361
Total operating expenses, $m
  461
  475
  487
  499
  512
  527
  542
  558
  577
  596
  615
  636
  658
  682
  706
  732
  760
  789
  819
  851
  884
  919
  956
  995
  1,034
  1,077
  1,121
  1,167
  1,215
  1,267
  1,320
Operating income, $m
  202
  201
  205
  211
  217
  225
  234
  243
  254
  266
  279
  294
  310
  327
  344
  364
  384
  406
  430
  455
  482
  510
  540
  572
  606
  642
  680
  720
  763
  808
  855
EBITDA, $m
  308
  309
  316
  324
  334
  345
  358
  372
  387
  404
  422
  442
  464
  487
  512
  538
  566
  596
  628
  663
  699
  737
  778
  821
  867
  915
  966
  1,020
  1,077
  1,137
  1,201
Interest expense (income), $m
  55
  52
  54
  56
  58
  60
  63
  66
  69
  73
  76
  80
  84
  89
  94
  99
  104
  110
  116
  122
  129
  136
  144
  152
  160
  169
  178
  188
  199
  209
  221
Earnings before tax, $m
  141
  149
  151
  155
  159
  165
  171
  177
  185
  194
  203
  214
  225
  238
  251
  265
  280
  297
  314
  333
  352
  374
  396
  420
  446
  473
  501
  532
  564
  598
  634
Tax expense, $m
  32
  40
  41
  42
  43
  44
  46
  48
  50
  52
  55
  58
  61
  64
  68
  72
  76
  80
  85
  90
  95
  101
  107
  113
  120
  128
  135
  144
  152
  161
  171
Net income, $m
  94
  109
  110
  113
  116
  120
  125
  130
  135
  141
  148
  156
  165
  173
  183
  193
  205
  216
  229
  243
  257
  273
  289
  307
  325
  345
  366
  388
  412
  437
  463

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  230
  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
  2,462
  2,277
  2,329
  2,389
  2,456
  2,531
  2,613
  2,702
  2,798
  2,902
  3,013
  3,132
  3,259
  3,395
  3,538
  3,691
  3,853
  4,024
  4,205
  4,396
  4,598
  4,812
  5,036
  5,273
  5,523
  5,786
  6,063
  6,354
  6,661
  6,983
  7,323
Adjusted assets (=assets-cash), $m
  2,232
  2,277
  2,329
  2,389
  2,456
  2,531
  2,613
  2,702
  2,798
  2,902
  3,013
  3,132
  3,259
  3,395
  3,538
  3,691
  3,853
  4,024
  4,205
  4,396
  4,598
  4,812
  5,036
  5,273
  5,523
  5,786
  6,063
  6,354
  6,661
  6,983
  7,323
Revenue / Adjusted assets
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
  0.297
Average production assets, $m
  1,096
  1,118
  1,144
  1,173
  1,206
  1,243
  1,283
  1,326
  1,374
  1,425
  1,479
  1,538
  1,600
  1,667
  1,737
  1,812
  1,892
  1,976
  2,064
  2,158
  2,258
  2,362
  2,473
  2,589
  2,711
  2,841
  2,976
  3,120
  3,270
  3,428
  3,595
Working capital, $m
  284
  122
  125
  128
  132
  136
  140
  145
  150
  156
  162
  168
  175
  182
  190
  198
  207
  216
  226
  236
  247
  259
  271
  283
  297
  311
  326
  342
  358
  375
  394
Total debt, $m
  939
  901
  932
  967
  1,007
  1,051
  1,099
  1,152
  1,209
  1,270
  1,336
  1,406
  1,481
  1,561
  1,646
  1,736
  1,832
  1,933
  2,040
  2,153
  2,273
  2,399
  2,532
  2,672
  2,819
  2,974
  3,138
  3,310
  3,492
  3,682
  3,883
Total liabilities, $m
  1,383
  1,346
  1,377
  1,412
  1,452
  1,496
  1,544
  1,597
  1,654
  1,715
  1,781
  1,851
  1,926
  2,006
  2,091
  2,181
  2,277
  2,378
  2,485
  2,598
  2,718
  2,844
  2,977
  3,117
  3,264
  3,419
  3,583
  3,755
  3,937
  4,127
  4,328
Total equity, $m
  1,078
  931
  953
  977
  1,005
  1,035
  1,069
  1,105
  1,144
  1,187
  1,232
  1,281
  1,333
  1,388
  1,447
  1,510
  1,576
  1,646
  1,720
  1,798
  1,881
  1,968
  2,060
  2,157
  2,259
  2,366
  2,480
  2,599
  2,724
  2,856
  2,995
Total liabilities and equity, $m
  2,461
  2,277
  2,330
  2,389
  2,457
  2,531
  2,613
  2,702
  2,798
  2,902
  3,013
  3,132
  3,259
  3,394
  3,538
  3,691
  3,853
  4,024
  4,205
  4,396
  4,599
  4,812
  5,037
  5,274
  5,523
  5,785
  6,063
  6,354
  6,661
  6,983
  7,323
Debt-to-equity ratio
  0.871
  0.970
  0.980
  0.990
  1.000
  1.020
  1.030
  1.040
  1.060
  1.070
  1.080
  1.100
  1.110
  1.120
  1.140
  1.150
  1.160
  1.170
  1.190
  1.200
  1.210
  1.220
  1.230
  1.240
  1.250
  1.260
  1.270
  1.270
  1.280
  1.290
  1.300
Adjusted equity ratio
  0.380
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409
  0.409

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  94
  109
  110
  113
  116
  120
  125
  130
  135
  141
  148
  156
  165
  173
  183
  193
  205
  216
  229
  243
  257
  273
  289
  307
  325
  345
  366
  388
  412
  437
  463
Depreciation, amort., depletion, $m
  106
  108
  111
  113
  117
  120
  124
  128
  133
  138
  143
  148
  154
  160
  167
  174
  182
  190
  199
  208
  217
  227
  238
  249
  261
  273
  286
  300
  314
  330
  346
Funds from operations, $m
  90
  217
  221
  227
  233
  240
  249
  258
  268
  279
  291
  304
  318
  334
  350
  368
  386
  406
  428
  450
  474
  500
  527
  556
  586
  618
  652
  688
  726
  766
  809
Change in working capital, $m
  -69
  2
  3
  3
  4
  4
  4
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
  16
  16
  17
  18
Cash from operations, $m
  159
  214
  218
  223
  229
  236
  244
  253
  263
  274
  285
  298
  312
  326
  342
  359
  378
  397
  418
  440
  464
  488
  515
  543
  573
  604
  637
  672
  710
  749
  790
Maintenance CAPEX, $m
  0
  -105
  -107
  -110
  -113
  -116
  -119
  -123
  -128
  -132
  -137
  -142
  -148
  -154
  -160
  -167
  -174
  -182
  -190
  -199
  -208
  -217
  -227
  -238
  -249
  -261
  -273
  -286
  -300
  -314
  -330
New CAPEX, $m
  -152
  -22
  -26
  -29
  -33
  -37
  -40
  -44
  -47
  -51
  -55
  -58
  -62
  -66
  -71
  -75
  -79
  -84
  -89
  -94
  -99
  -105
  -110
  -116
  -123
  -129
  -136
  -143
  -151
  -158
  -167
Cash from investing activities, $m
  -159
  -127
  -133
  -139
  -146
  -153
  -159
  -167
  -175
  -183
  -192
  -200
  -210
  -220
  -231
  -242
  -253
  -266
  -279
  -293
  -307
  -322
  -337
  -354
  -372
  -390
  -409
  -429
  -451
  -472
  -497
Free cash flow, $m
  0
  87
  85
  84
  84
  84
  85
  86
  88
  91
  94
  97
  101
  106
  112
  118
  124
  131
  139
  148
  157
  167
  177
  189
  201
  214
  228
  243
  259
  276
  294
Issuance/(repayment) of debt, $m
  26
  28
  31
  35
  40
  44
  48
  53
  57
  61
  66
  70
  75
  80
  85
  90
  96
  101
  107
  113
  119
  126
  133
  140
  148
  155
  164
  172
  181
  191
  201
Issuance/(repurchase) of shares, $m
  7
  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  
  70
  28
  31
  35
  40
  44
  48
  53
  57
  61
  66
  70
  75
  80
  85
  90
  96
  101
  107
  113
  119
  126
  133
  140
  148
  155
  164
  172
  181
  191
  201
Total cash flow (excl. dividends), $m
  70
  115
  116
  119
  123
  128
  133
  139
  145
  152
  159
  168
  176
  186
  197
  208
  220
  232
  246
  261
  276
  293
  310
  329
  349
  370
  392
  415
  440
  467
  495
Retained Cash Flow (-), $m
  -88
  -17
  -21
  -24
  -27
  -30
  -33
  -36
  -39
  -42
  -46
  -49
  -52
  -55
  -59
  -62
  -66
  -70
  -74
  -78
  -83
  -87
  -92
  -97
  -102
  -108
  -113
  -119
  -125
  -132
  -139
Prev. year cash balance distribution, $m
 
  164
  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
 
  261
  95
  95
  96
  97
  99
  102
  106
  109
  114
  119
  124
  131
  138
  145
  154
  162
  172
  182
  194
  206
  218
  232
  247
  262
  279
  296
  315
  335
  356
Discount rate, %
 
  6.10
  6.41
  6.73
  7.06
  7.41
  7.79
  8.17
  8.58
  9.01
  9.46
  9.94
  10.43
  10.95
  11.50
  12.08
  12.68
  13.32
  13.98
  14.68
  15.41
  16.19
  16.99
  17.84
  18.74
  19.67
  20.66
  21.69
  22.77
  23.91
  25.11
PV of cash for distribution, $m
 
  246
  84
  78
  73
  68
  63
  59
  55
  50
  46
  42
  38
  34
  30
  26
  23
  19
  16
  14
  11
  9
  7
  5
  4
  3
  2
  1
  1
  1
  0
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

Ormat Technologies, Inc. is engaged in the geothermal and recovered energy power business. The Company designs, develops, builds, owns and operates geothermal and recovered energy-based power plants. Its equipment manufacturing operations are located in Israel. It conducts its business activities in two business segments: Electricity segment and Product segment. The Electricity segment develops, builds, owns and operates geothermal and recovered energy-based power plants in the United States and geothermal power plants in other countries around the world, and sells the electricity it generates. The Product Segment designs, manufactures and sells equipment for geothermal and recovered energy-based electricity generation and remote power units, and provide services relating to the engineering, procurement, construction, operation and maintenance of geothermal, and recovered energy-based power plants. It manufactures products that produce electricity from recovered energy or waste heat.

FINANCIAL RATIOS  of  Ormat Technologies (ORA)

Valuation Ratios
P/E Ratio 35.2
Price to Sales 5
Price to Book 3.1
Price to Tangible Book
Price to Cash Flow 20.8
Price to Free Cash Flow 472.4
Growth Rates
Sales Growth Rate 11.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -5.8%
Financial Strength
Quick Ratio 3
Current Ratio 0.2
LT Debt to Equity 81%
Total Debt to Equity 87.1%
Interest Coverage 4
Management Effectiveness
Return On Assets 5.8%
Ret/ On Assets - 3 Yr. Avg. 6.2%
Return On Total Capital 4.8%
Ret/ On T. Cap. - 3 Yr. Avg. 4.8%
Return On Equity 9.1%
Return On Equity - 3 Yr. Avg. 10%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 40.9%
Gross Margin - 3 Yr. Avg. 38%
EBITDA Margin 45.6%
EBITDA Margin - 3 Yr. Avg. 45.5%
Operating Margin 30.5%
Oper. Margin - 3 Yr. Avg. 27.9%
Pre-Tax Margin 21.3%
Pre-Tax Margin - 3 Yr. Avg. 18.6%
Net Profit Margin 14.2%
Net Profit Margin - 3 Yr. Avg. 14.7%
Effective Tax Rate 22.7%
Eff/ Tax Rate - 3 Yr. Avg. 14%
Payout Ratio 27.7%

ORA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ORA stock intrinsic value calculation we used $663 million for the last fiscal year's total revenue generated by Ormat Technologies. The default revenue input number comes from 2016 income statement of Ormat Technologies. 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 ORA stock valuation model: a) initial revenue growth rate of 2% 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 6.1%, whose default value for ORA is calculated based on our internal credit rating of Ormat Technologies, 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 Ormat Technologies.
    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 ORA stock the variable cost ratio is equal to 44.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $172 million in the base year in the intrinsic value calculation for ORA 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 6% for Ormat Technologies.

Corporate tax rate of 27% is the nominal tax rate for Ormat Technologies. 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 ORA 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 ORA are equal to 165.3%.

Life of production assets of 10.4 years is the average useful life of capital assets used in Ormat Technologies 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 ORA is equal to 18.1%. 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 - $1078 million for Ormat Technologies - 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 50.813 million for Ormat Technologies 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 Ormat Technologies at the current share price and the inputted number of shares is $3.4 billion.

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COMPANY NEWS

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▶ Ormat Technologies tops Street 2Q forecasts   [05:21PM  Associated Press]
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▶ Get Ready To Be Surprised This Earnings Season   [Apr-11-17 03:20PM  Zacks]
Financial statements of ORA
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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