Intrinsic value of Orion Group Holdings - ORN

Previous Close

$5.37

  Intrinsic Value

$1.50

stock screener

  Rating & Target

str. sell

-72%

  Value-price divergence*

-152%

Previous close

$5.37

 
Intrinsic value

$1.50

 
Up/down potential

-72%

 
Rating

str. sell

 
Value-price divergence*

-152%

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

We calculate the intrinsic value of ORN 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 0.1

 

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, %
  23.77
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
Revenue, $m
  578
  618
  659
  702
  747
  794
  843
  893
  946
  1,001
  1,058
  1,118
  1,181
  1,246
  1,315
  1,386
  1,461
  1,539
  1,621
  1,707
  1,796
  1,890
  1,989
  2,092
  2,200
  2,313
  2,432
  2,557
  2,687
  2,824
  2,968
Variable operating expenses, $m
 
  551
  588
  626
  665
  707
  749
  794
  841
  889
  940
  986
  1,041
  1,099
  1,159
  1,222
  1,288
  1,357
  1,429
  1,505
  1,584
  1,666
  1,753
  1,844
  1,939
  2,039
  2,144
  2,254
  2,369
  2,490
  2,617
Fixed operating expenses, $m
 
  60
  62
  64
  65
  67
  68
  70
  72
  74
  76
  77
  79
  81
  83
  85
  88
  90
  92
  94
  97
  99
  102
  104
  107
  109
  112
  115
  118
  121
  124
Total operating expenses, $m
  574
  611
  650
  690
  730
  774
  817
  864
  913
  963
  1,016
  1,063
  1,120
  1,180
  1,242
  1,307
  1,376
  1,447
  1,521
  1,599
  1,681
  1,765
  1,855
  1,948
  2,046
  2,148
  2,256
  2,369
  2,487
  2,611
  2,741
Operating income, $m
  4
  6
  9
  13
  17
  21
  25
  29
  34
  38
  43
  55
  61
  66
  72
  79
  85
  92
  100
  108
  116
  125
  134
  144
  154
  165
  176
  188
  200
  214
  228
EBITDA, $m
  38
  33
  37
  42
  48
  53
  59
  65
  71
  77
  84
  91
  99
  107
  115
  124
  133
  142
  152
  163
  174
  186
  198
  211
  225
  240
  255
  271
  288
  305
  324
Interest expense (income), $m
  5
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  23
  24
  26
  27
  29
  31
  33
  35
  37
  39
  41
  44
  46
Earnings before tax, $m
  -2
  1
  4
  7
  10
  13
  16
  19
  23
  27
  31
  41
  46
  50
  55
  60
  66
  71
  77
  84
  90
  97
  105
  113
  121
  130
  139
  149
  159
  170
  181
Tax expense, $m
  2
  0
  1
  2
  3
  3
  4
  5
  6
  7
  8
  11
  12
  14
  15
  16
  18
  19
  21
  23
  24
  26
  28
  30
  33
  35
  38
  40
  43
  46
  49
Net income, $m
  -4
  1
  3
  5
  7
  9
  12
  14
  17
  19
  22
  30
  33
  37
  40
  44
  48
  52
  56
  61
  66
  71
  77
  82
  88
  95
  101
  109
  116
  124
  132

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  448
  479
  511
  545
  579
  615
  653
  692
  733
  776
  821
  867
  916
  966
  1,019
  1,075
  1,132
  1,193
  1,257
  1,323
  1,392
  1,465
  1,542
  1,622
  1,705
  1,793
  1,885
  1,982
  2,083
  2,189
  2,301
Adjusted assets (=assets-cash), $m
  448
  479
  511
  545
  579
  615
  653
  692
  733
  776
  821
  867
  916
  966
  1,019
  1,075
  1,132
  1,193
  1,257
  1,323
  1,392
  1,465
  1,542
  1,622
  1,705
  1,793
  1,885
  1,982
  2,083
  2,189
  2,301
Revenue / Adjusted assets
  1.290
  1.290
  1.290
  1.288
  1.290
  1.291
  1.291
  1.290
  1.291
  1.290
  1.289
  1.290
  1.289
  1.290
  1.290
  1.289
  1.291
  1.290
  1.290
  1.290
  1.290
  1.290
  1.290
  1.290
  1.290
  1.290
  1.290
  1.290
  1.290
  1.290
  1.290
Average production assets, $m
  188
  200
  214
  228
  242
  257
  273
  289
  307
  324
  343
  362
  383
  404
  426
  449
  473
  499
  525
  553
  582
  612
  644
  678
  713
  750
  788
  828
  871
  915
  962
Working capital, $m
  77
  103
  109
  117
  124
  132
  140
  148
  157
  166
  176
  186
  196
  207
  218
  230
  243
  255
  269
  283
  298
  314
  330
  347
  365
  384
  404
  424
  446
  469
  493
Total debt, $m
  101
  117
  133
  149
  166
  184
  203
  222
  243
  264
  286
  309
  333
  358
  385
  412
  441
  471
  502
  535
  570
  606
  644
  683
  725
  768
  814
  862
  912
  965
  1,020
Total liabilities, $m
  221
  238
  254
  270
  287
  305
  324
  343
  364
  385
  407
  430
  454
  479
  506
  533
  562
  592
  623
  656
  691
  727
  765
  804
  846
  889
  935
  983
  1,033
  1,086
  1,141
Total equity, $m
  226
  241
  258
  274
  292
  310
  329
  349
  370
  391
  414
  437
  461
  487
  514
  542
  571
  601
  633
  667
  702
  739
  777
  817
  860
  904
  950
  999
  1,050
  1,104
  1,160
Total liabilities and equity, $m
  447
  479
  512
  544
  579
  615
  653
  692
  734
  776
  821
  867
  915
  966
  1,020
  1,075
  1,133
  1,193
  1,256
  1,323
  1,393
  1,466
  1,542
  1,621
  1,706
  1,793
  1,885
  1,982
  2,083
  2,190
  2,301
Debt-to-equity ratio
  0.447
  0.480
  0.510
  0.540
  0.570
  0.590
  0.620
  0.640
  0.660
  0.670
  0.690
  0.710
  0.720
  0.740
  0.750
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.820
  0.830
  0.840
  0.840
  0.850
  0.860
  0.860
  0.870
  0.870
  0.880
Adjusted equity ratio
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504
  0.504

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -4
  1
  3
  5
  7
  9
  12
  14
  17
  19
  22
  30
  33
  37
  40
  44
  48
  52
  56
  61
  66
  71
  77
  82
  88
  95
  101
  109
  116
  124
  132
Depreciation, amort., depletion, $m
  34
  27
  28
  29
  31
  32
  34
  36
  37
  39
  41
  36
  38
  40
  43
  45
  47
  50
  53
  55
  58
  61
  64
  68
  71
  75
  79
  83
  87
  92
  96
Funds from operations, $m
  13
  28
  31
  34
  38
  42
  46
  50
  54
  58
  63
  66
  72
  77
  83
  89
  95
  102
  109
  116
  124
  132
  141
  150
  160
  170
  180
  191
  203
  216
  229
Change in working capital, $m
  -10
  7
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
Cash from operations, $m
  23
  21
  24
  27
  30
  34
  37
  41
  45
  49
  54
  56
  61
  66
  71
  77
  83
  89
  95
  102
  109
  117
  125
  133
  142
  151
  161
  171
  182
  193
  205
Maintenance CAPEX, $m
  0
  -19
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -47
  -50
  -53
  -55
  -58
  -61
  -64
  -68
  -71
  -75
  -79
  -83
  -87
  -92
New CAPEX, $m
  -19
  -13
  -13
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -37
  -38
  -40
  -42
  -44
  -47
Cash from investing activities, $m
  -18
  -32
  -33
  -35
  -38
  -39
  -42
  -43
  -46
  -49
  -51
  -53
  -56
  -59
  -62
  -66
  -69
  -72
  -77
  -81
  -84
  -88
  -93
  -97
  -103
  -108
  -113
  -119
  -125
  -131
  -139
Free cash flow, $m
  5
  -11
  -10
  -8
  -7
  -6
  -4
  -2
  -1
  1
  3
  3
  5
  7
  9
  11
  14
  16
  19
  22
  25
  28
  31
  35
  39
  43
  47
  52
  56
  61
  67
Issuance/(repayment) of debt, $m
  -6
  16
  16
  17
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  38
  40
  42
  44
  46
  48
  50
  53
  55
Issuance/(repurchase) of shares, $m
  0
  14
  13
  12
  11
  9
  7
  6
  4
  2
  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  
  -7
  30
  29
  29
  28
  27
  26
  25
  24
  23
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  38
  40
  42
  44
  46
  48
  50
  53
  55
Total cash flow (excl. dividends), $m
  -1
  20
  20
  20
  21
  21
  22
  23
  23
  24
  25
  26
  29
  32
  35
  39
  42
  46
  50
  55
  59
  64
  69
  75
  80
  86
  93
  99
  107
  114
  122
Retained Cash Flow (-), $m
  2
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -26
  -27
  -28
  -29
  -31
  -32
  -33
  -35
  -37
  -38
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -56
Prev. year cash balance distribution, $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 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
 
  4
  4
  3
  3
  3
  3
  3
  3
  3
  2
  2
  4
  6
  9
  11
  13
  16
  18
  21
  24
  28
  31
  34
  38
  42
  46
  51
  56
  60
  66
Discount rate, %
 
  5.80
  6.09
  6.39
  6.71
  7.05
  7.40
  7.77
  8.16
  8.57
  9.00
  9.45
  9.92
  10.42
  10.94
  11.48
  12.06
  12.66
  13.29
  13.96
  14.66
  15.39
  16.16
  16.97
  17.81
  18.71
  19.64
  20.62
  21.65
  22.74
  23.87
PV of cash for distribution, $m
 
  4
  3
  3
  3
  2
  2
  2
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  1
  1
  1
  1
  1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  91.6
  84.9
  79.6
  75.5
  72.3
  69.9
  68.2
  67.2
  66.6
  66.6
  66.6
  66.6
  66.6
  66.6
  66.6
  66.6
  66.6
  66.6
  66.6
  66.6
  66.6
  66.6
  66.6
  66.6
  66.6
  66.6
  66.6
  66.6
  66.6
  66.6

Orion Group Holdings, Inc. provides construction and specialty services both on and off the water in the continental United States, Alaska, Canada, and the Caribbean Basin. The company operates through two segments, Heavy Civil Marine Construction and Commercial Concrete Construction. Its marine construction services include construction, restoration, maintenance, and repair of marine transportation facilities, marine pipelines, bridges and causeways, and marine environmental structures. The company’s marine transportation facility projects comprise public port facilities for container ship loading and unloading; cruise ship port facilities; private terminals; and special-use navy terminals, recreational use marinas and docks, and other marine-based facilities. Its marine pipeline service projects consist of the installation and removal of underwater buried pipeline transmission lines; installation of pipeline intakes and outfalls for industrial facilities; construction of pipeline outfalls for wastewater and industrial discharges; river crossing and directional drilling; creation of hot taps and tie-ins; and inspection, maintenance, and repair services. The company’s bridge and causeway projects include the construction, repair, and maintenance of overwater bridges and causeways, as well as the development of fendering systems in marine environments; and marine environmental structure for erosion control, wetlands creation, and environmental remediation. In addition, it offers dredging services; and specialty services, such as design, salvage, demolition, surveying, towing, diving and underwater inspection, excavation, and repair services. The company serves federal, state, and local governments, as well as private commercial and industrial enterprises. The company was formerly known as Orion Marine Group, Inc. and changed its name to Orion Group Holdings, Inc. in May 2016. Orion Group Holdings, Inc. was founded in 1994 and is headquartered in Houston, Texas.

FINANCIAL RATIOS  of  Orion Group Holdings (ORN)

Valuation Ratios
P/E Ratio -37.2
Price to Sales 0.3
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow 6.5
Price to Free Cash Flow 37.2
Growth Rates
Sales Growth Rate 23.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -9.5%
Cap. Spend. - 3 Yr. Gr. Rate 7.9%
Financial Strength
Quick Ratio 0
Current Ratio 0.4
LT Debt to Equity 36.3%
Total Debt to Equity 44.7%
Interest Coverage 1
Management Effectiveness
Return On Assets 1.3%
Ret/ On Assets - 3 Yr. Avg. 0.7%
Return On Total Capital -1.2%
Ret/ On T. Cap. - 3 Yr. Avg. -0.4%
Return On Equity -1.8%
Return On Equity - 3 Yr. Avg. -0.7%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 11.6%
Gross Margin - 3 Yr. Avg. 10.6%
EBITDA Margin 6.4%
EBITDA Margin - 3 Yr. Avg. 6.5%
Operating Margin 0.7%
Oper. Margin - 3 Yr. Avg. 0.5%
Pre-Tax Margin -0.3%
Pre-Tax Margin - 3 Yr. Avg. -0%
Net Profit Margin -0.7%
Net Profit Margin - 3 Yr. Avg. -0.2%
Effective Tax Rate -100%
Eff/ Tax Rate - 3 Yr. Avg. -14.2%
Payout Ratio 0%

ORN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ORN stock intrinsic value calculation we used $578 million for the last fiscal year's total revenue generated by Orion Group Holdings. The default revenue input number comes from 2016 income statement of Orion Group Holdings. 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 ORN stock valuation model: a) initial revenue growth rate of 6.9% 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 5.8%, whose default value for ORN is calculated based on our internal credit rating of Orion Group Holdings, 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 Group Holdings.
    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 ORN stock the variable cost ratio is equal to 89.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $59 million in the base year in the intrinsic value calculation for ORN 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 4.8% for Orion Group Holdings.

Corporate tax rate of 27% is the nominal tax rate for Orion Group Holdings. 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 ORN 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 ORN are equal to 32.4%.

Life of production assets of 10 years is the average useful life of capital assets used in Orion Group Holdings 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 ORN is equal to 16.6%. 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 - $226 million for Orion Group Holdings - 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 26.683 million for Orion Group Holdings 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 Group Holdings at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Orion Marine reports 2Q loss   [Aug-03-17 05:21PM  Associated Press]
▶ Orion Marine reports 1Q loss   [May-04-17 05:06AM  Associated Press]
▶ Orion Marine reports 4Q loss   [05:34AM  Associated Press]
▶ Orion Marine Group Updates Investors   [Jan-25-16 05:17AM  at noodls]
▶ Orion Marine Group Updates Investors   [05:00AM  GlobeNewswire]
Stock chart of ORN Financial statements of ORN
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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