Intrinsic value of Orion Group Holdings - ORN

Previous Close

$7.17

  Intrinsic Value

$1.39

stock screener

  Rating & Target

str. sell

-81%

  Value-price divergence*

+11%

Previous close

$7.17

 
Intrinsic value

$1.39

 
Up/down potential

-81%

 
Rating

str. sell

 
Value-price divergence*

+11%

*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 0.2

 

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
  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
  578
  590
  603
  619
  636
  655
  676
  699
  724
  751
  780
  811
  844
  879
  916
  956
  998
  1,042
  1,089
  1,138
  1,191
  1,246
  1,304
  1,365
  1,430
  1,498
  1,570
  1,645
  1,725
  1,808
  1,896
Variable operating expenses, $m
 
  526
  538
  552
  567
  584
  603
  623
  645
  669
  694
  715
  744
  775
  808
  843
  879
  919
  960
  1,004
  1,050
  1,098
  1,150
  1,204
  1,261
  1,321
  1,384
  1,450
  1,520
  1,594
  1,671
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
  586
  600
  616
  632
  651
  671
  693
  717
  743
  770
  792
  823
  856
  891
  928
  967
  1,009
  1,052
  1,098
  1,147
  1,197
  1,252
  1,308
  1,368
  1,430
  1,496
  1,565
  1,638
  1,715
  1,795
Operating income, $m
  4
  3
  3
  3
  4
  4
  5
  6
  7
  9
  10
  19
  21
  23
  25
  28
  31
  34
  37
  40
  44
  48
  53
  58
  63
  68
  74
  80
  86
  93
  101
EBITDA, $m
  38
  35
  35
  36
  38
  39
  41
  43
  45
  48
  51
  54
  57
  61
  65
  69
  74
  79
  84
  90
  96
  102
  109
  117
  124
  133
  142
  151
  161
  171
  183
Interest expense (income), $m
  5
  5
  5
  5
  6
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  21
  22
  23
  25
  26
  28
Earnings before tax, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -1
  -1
  0
  1
  2
  10
  11
  13
  15
  17
  19
  21
  23
  26
  29
  32
  36
  39
  43
  47
  52
  57
  62
  67
  73
Tax expense, $m
  2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  3
  3
  4
  4
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  20
Net income, $m
  -4
  -2
  -2
  -2
  -2
  -2
  -1
  -1
  0
  1
  2
  7
  8
  9
  11
  12
  14
  15
  17
  19
  21
  24
  26
  29
  32
  35
  38
  41
  45
  49
  53

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
  457
  468
  480
  493
  508
  524
  542
  562
  582
  605
  629
  654
  681
  710
  741
  773
  808
  844
  882
  923
  966
  1,011
  1,058
  1,109
  1,161
  1,217
  1,275
  1,337
  1,402
  1,470
Adjusted assets (=assets-cash), $m
  448
  457
  468
  480
  493
  508
  524
  542
  562
  582
  605
  629
  654
  681
  710
  741
  773
  808
  844
  882
  923
  966
  1,011
  1,058
  1,109
  1,161
  1,217
  1,275
  1,337
  1,402
  1,470
Revenue / Adjusted assets
  1.290
  1.291
  1.288
  1.290
  1.290
  1.289
  1.290
  1.290
  1.288
  1.290
  1.289
  1.289
  1.291
  1.291
  1.290
  1.290
  1.291
  1.290
  1.290
  1.290
  1.290
  1.290
  1.290
  1.290
  1.289
  1.290
  1.290
  1.290
  1.290
  1.290
  1.290
Average production assets, $m
  188
  191
  195
  200
  206
  212
  219
  227
  235
  243
  253
  263
  273
  285
  297
  310
  323
  338
  353
  369
  386
  404
  423
  442
  463
  485
  509
  533
  559
  586
  614
Working capital, $m
  77
  98
  100
  103
  106
  109
  112
  116
  120
  125
  130
  135
  140
  146
  152
  159
  166
  173
  181
  189
  198
  207
  216
  227
  237
  249
  261
  273
  286
  300
  315
Total debt, $m
  101
  106
  111
  117
  124
  131
  139
  148
  158
  168
  179
  191
  203
  217
  231
  246
  263
  280
  298
  317
  337
  358
  380
  404
  429
  455
  483
  512
  542
  574
  608
Total liabilities, $m
  221
  227
  232
  238
  245
  252
  260
  269
  279
  289
  300
  312
  324
  338
  352
  367
  384
  401
  419
  438
  458
  479
  501
  525
  550
  576
  604
  633
  663
  695
  729
Total equity, $m
  226
  230
  236
  242
  248
  256
  264
  273
  283
  294
  305
  317
  330
  343
  358
  373
  390
  407
  425
  445
  465
  487
  509
  533
  559
  585
  613
  643
  674
  706
  741
Total liabilities and equity, $m
  447
  457
  468
  480
  493
  508
  524
  542
  562
  583
  605
  629
  654
  681
  710
  740
  774
  808
  844
  883
  923
  966
  1,010
  1,058
  1,109
  1,161
  1,217
  1,276
  1,337
  1,401
  1,470
Debt-to-equity ratio
  0.447
  0.460
  0.470
  0.480
  0.500
  0.510
  0.530
  0.540
  0.560
  0.570
  0.590
  0.600
  0.620
  0.630
  0.650
  0.660
  0.670
  0.690
  0.700
  0.710
  0.720
  0.740
  0.750
  0.760
  0.770
  0.780
  0.790
  0.800
  0.800
  0.810
  0.820
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
  -2
  -2
  -2
  -2
  -2
  -1
  -1
  0
  1
  2
  7
  8
  9
  11
  12
  14
  15
  17
  19
  21
  24
  26
  29
  32
  35
  38
  41
  45
  49
  53
Depreciation, amort., depletion, $m
  34
  32
  33
  33
  34
  35
  36
  37
  38
  39
  40
  35
  36
  38
  40
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
  75
  78
  82
Funds from operations, $m
  13
  30
  30
  31
  32
  33
  35
  36
  38
  40
  42
  42
  45
  47
  50
  53
  57
  60
  64
  68
  73
  77
  82
  88
  93
  99
  106
  112
  120
  127
  135
Change in working capital, $m
  -10
  2
  2
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  13
  14
  15
Cash from operations, $m
  23
  28
  28
  29
  29
  30
  31
  32
  34
  35
  37
  37
  39
  42
  44
  47
  50
  53
  56
  60
  64
  68
  73
  78
  83
  88
  94
  100
  106
  113
  121
Maintenance CAPEX, $m
  0
  -25
  -25
  -26
  -27
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -62
  -65
  -68
  -71
  -75
  -78
New CAPEX, $m
  -19
  -4
  -4
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
Cash from investing activities, $m
  -18
  -29
  -29
  -31
  -33
  -33
  -35
  -36
  -38
  -40
  -41
  -44
  -46
  -47
  -50
  -53
  -55
  -57
  -60
  -63
  -66
  -69
  -73
  -76
  -80
  -84
  -88
  -92
  -97
  -102
  -106
Free cash flow, $m
  5
  0
  -2
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -5
  -4
  -4
  -3
  -2
  -1
  0
  1
  3
  4
  6
  8
  10
  12
  14
Issuance/(repayment) of debt, $m
  -6
  5
  5
  6
  7
  7
  8
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
Issuance/(repurchase) of shares, $m
  0
  6
  8
  8
  9
  9
  9
  10
  10
  10
  10
  5
  5
  4
  4
  3
  3
  2
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -7
  11
  13
  14
  16
  16
  17
  19
  20
  20
  21
  17
  18
  17
  18
  18
  19
  19
  19
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
Total cash flow (excl. dividends), $m
  -1
  11
  11
  12
  12
  13
  14
  14
  15
  15
  16
  10
  11
  12
  12
  13
  14
  15
  15
  16
  18
  20
  22
  25
  28
  30
  33
  37
  40
  44
  48
Retained Cash Flow (-), $m
  2
  -6
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -15
  -16
  -17
  -18
  -19
  -20
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -33
  -34
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
  4
  4
  5
  5
  5
  5
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -2
  -1
  0
  1
  2
  4
  5
  7
  9
  11
  14
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
  3
  3
  3
  3
  2
  2
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  97.0
  93.6
  90.2
  86.7
  83.3
  80.1
  77.1
  74.2
  71.5
  69.1
  67.9
  66.9
  65.9
  65.2
  64.5
  64.0
  63.6
  63.4
  63.4
  63.4
  63.4
  63.4
  63.4
  63.4
  63.4
  63.4
  63.4
  63.4
  63.4
  63.4

Orion Group Holdings, Inc., formerly Orion Marine Group, Inc., is engaged in heavy civil construction project management business. The Company specializes in marine construction. It provides a range of heavy civil marine construction services to federal agencies, state and municipal governments, and private commercial and industrial customers. Its heavy civil marine construction and project management services include new construction, dredging, repair and maintenance, and other related specialty services. It provides heavy civil marine construction services on, over and under the water in the continental United States, Alaska, Canada and the Caribbean Basin. It provides heavy civil marine construction services through projects that are obtained primarily through a competitive bid or contract process. It also provides tilt-wall construction services, parking structures, concrete slabs for commercial and institutional applications, curbs, gutters and paving, among other capabilities.

FINANCIAL RATIOS  of  Orion Group Holdings (ORN)

Valuation Ratios
P/E Ratio -49.6
Price to Sales 0.3
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 8.6
Price to Free Cash Flow 49.6
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 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 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 7.5 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 28.85 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 $0.2 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]
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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