Intrinsic value of Orion Energy Systems - OESX

Previous Close

$0.81

  Intrinsic Value

$0.18

stock screener

  Rating & Target

str. sell

-78%

Previous close

$0.81

 
Intrinsic value

$0.18

 
Up/down potential

-78%

 
Rating

str. sell

We calculate the intrinsic value of OESX 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 0001), $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 0.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  10.10
  9.59
  9.13
  8.72
  8.35
  8.01
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
Revenue, $m
  66
  73
  79
  86
  94
  101
  109
  117
  125
  134
  143
  153
  162
  173
  183
  194
  206
  218
  231
  244
  257
  272
  287
  302
  319
  336
  354
  372
  392
  412
Variable operating expenses, $m
  62
  68
  74
  80
  87
  94
  101
  109
  117
  125
  133
  142
  151
  160
  170
  180
  191
  202
  214
  226
  239
  252
  266
  281
  296
  312
  328
  346
  364
  383
Fixed operating expenses, $m
  18
  19
  19
  20
  20
  21
  21
  21
  22
  22
  23
  23
  24
  24
  25
  25
  26
  27
  27
  28
  28
  29
  30
  30
  31
  32
  32
  33
  34
  35
Total operating expenses, $m
  80
  87
  93
  100
  107
  115
  122
  130
  139
  147
  156
  165
  175
  184
  195
  205
  217
  229
  241
  254
  267
  281
  296
  311
  327
  344
  360
  379
  398
  418
Operating income, $m
  -14
  -14
  -14
  -14
  -14
  -14
  -13
  -13
  -13
  -13
  -13
  -12
  -12
  -12
  -12
  -12
  -11
  -11
  -11
  -10
  -10
  -10
  -9
  -9
  -8
  -8
  -7
  -6
  -6
  -5
EBITDA, $m
  -12
  -11
  -11
  -11
  -11
  -10
  -10
  -10
  -9
  -9
  -8
  -8
  -7
  -7
  -6
  -6
  -5
  -4
  -4
  -3
  -2
  -1
  -1
  0
  1
  2
  4
  5
  6
  7
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
Earnings before tax, $m
  -14
  -14
  -14
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
Tax expense, $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
Net income, $m
  -14
  -14
  -14
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15

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
Total assets, $m
  50
  55
  60
  65
  71
  76
  82
  88
  95
  101
  108
  115
  123
  130
  138
  147
  156
  165
  174
  184
  194
  205
  216
  228
  241
  254
  267
  281
  296
  312
Adjusted assets (=assets-cash), $m
  50
  55
  60
  65
  71
  76
  82
  88
  95
  101
  108
  115
  123
  130
  138
  147
  156
  165
  174
  184
  194
  205
  216
  228
  241
  254
  267
  281
  296
  312
Revenue / Adjusted assets
  1.320
  1.327
  1.317
  1.323
  1.324
  1.329
  1.329
  1.330
  1.316
  1.327
  1.324
  1.330
  1.317
  1.331
  1.326
  1.320
  1.321
  1.321
  1.328
  1.326
  1.325
  1.327
  1.329
  1.325
  1.324
  1.323
  1.326
  1.324
  1.324
  1.321
Average production assets, $m
  17
  18
  20
  22
  24
  25
  27
  29
  32
  34
  36
  38
  41
  44
  46
  49
  52
  55
  58
  61
  65
  68
  72
  76
  80
  85
  89
  94
  99
  104
Working capital, $m
  4
  4
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  22
  23
  24
  25
Total debt, $m
  6
  9
  11
  14
  16
  19
  22
  25
  28
  31
  34
  38
  41
  45
  49
  53
  57
  62
  66
  71
  76
  81
  87
  92
  98
  105
  111
  118
  125
  133
Total liabilities, $m
  24
  27
  29
  31
  34
  37
  40
  43
  46
  49
  52
  56
  59
  63
  67
  71
  75
  80
  84
  89
  94
  99
  105
  110
  116
  122
  129
  136
  143
  150
Total equity, $m
  26
  28
  31
  34
  37
  39
  42
  46
  49
  52
  56
  60
  63
  67
  72
  76
  80
  85
  90
  95
  100
  106
  112
  118
  124
  131
  138
  145
  153
  161
Total liabilities and equity, $m
  50
  55
  60
  65
  71
  76
  82
  89
  95
  101
  108
  116
  122
  130
  139
  147
  155
  165
  174
  184
  194
  205
  217
  228
  240
  253
  267
  281
  296
  311
Debt-to-equity ratio
  0.250
  0.310
  0.360
  0.410
  0.450
  0.480
  0.520
  0.540
  0.570
  0.590
  0.620
  0.640
  0.650
  0.670
  0.690
  0.700
  0.710
  0.730
  0.740
  0.750
  0.760
  0.770
  0.780
  0.780
  0.790
  0.800
  0.810
  0.810
  0.820
  0.820
Adjusted equity ratio
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517
  0.517

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -14
  -14
  -14
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
  -15
Depreciation, amort., depletion, $m
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  12
Funds from operations, $m
  -12
  -12
  -12
  -12
  -12
  -11
  -11
  -11
  -11
  -11
  -11
  -10
  -10
  -10
  -10
  -9
  -9
  -9
  -9
  -8
  -8
  -7
  -7
  -6
  -6
  -5
  -4
  -4
  -3
  -2
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
Cash from operations, $m
  -12
  -12
  -12
  -12
  -12
  -12
  -12
  -12
  -12
  -11
  -11
  -11
  -11
  -11
  -10
  -10
  -10
  -10
  -9
  -9
  -9
  -8
  -8
  -7
  -7
  -6
  -6
  -5
  -4
  -3
Maintenance CAPEX, $m
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
New CAPEX, $m
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
Cash from investing activities, $m
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
Free cash flow, $m
  -16
  -16
  -16
  -16
  -16
  -17
  -17
  -17
  -17
  -17
  -18
  -18
  -18
  -18
  -18
  -18
  -19
  -19
  -19
  -19
  -19
  -19
  -20
  -20
  -20
  -20
  -20
  -20
  -20
  -20
Issuance/(repayment) of debt, $m
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  7
Issuance/(repurchase) of shares, $m
  17
  17
  17
  17
  18
  18
  18
  18
  18
  19
  19
  19
  19
  19
  19
  20
  20
  20
  20
  21
  21
  21
  21
  21
  22
  22
  22
  22
  22
  23
Cash from financing (excl. dividends), $m  
  19
  19
  19
  20
  21
  21
  21
  21
  21
  22
  22
  22
  23
  23
  23
  24
  24
  24
  25
  26
  26
  26
  26
  27
  28
  28
  29
  29
  29
  30
Total cash flow (excl. dividends), $m
  3
  3
  3
  4
  4
  4
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
Retained Cash Flow (-), $m
  -17
  -17
  -17
  -17
  -18
  -18
  -18
  -18
  -18
  -19
  -19
  -19
  -19
  -19
  -19
  -20
  -20
  -20
  -20
  -21
  -21
  -21
  -21
  -21
  -22
  -22
  -22
  -22
  -22
  -23
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
  -13
  -14
  -14
  -14
  -14
  -14
  -14
  -14
  -14
  -14
  -14
  -14
  -14
  -14
  -14
  -14
  -14
  -14
  -14
  -14
  -14
  -14
  -14
  -14
  -14
  -14
  -14
  -13
  -13
  -13
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
  -13
  -12
  -12
  -11
  -11
  -10
  -9
  -9
  -8
  -7
  -7
  -6
  -5
  -5
  -4
  -4
  -3
  -3
  -2
  -2
  -1
  -1
  -1
  -1
  -1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  58.7
  35.9
  22.5
  14.6
  9.6
  6.5
  4.5
  3.2
  2.3
  1.7
  1.2
  0.9
  0.7
  0.5
  0.4
  0.3
  0.3
  0.2
  0.2
  0.1
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Orion Energy Systems, Inc. is a designer and manufacturer of lighting platforms. The Company researches, develops, designs, manufactures, markets, sells and implements energy management systems consisting primarily of commercial and industrial interior and exterior lighting systems, and related services. The Company operates through three segments: Orion U.S. Markets Division (USM), Orion Engineered Systems Division (OES) and Distribution Services Division (ODS). The USM division develops and sells its commercial lighting systems and energy management systems to the wholesale contractor markets. The OES division develops and sells lighting products, and provides construction and engineering services for its commercial light emitting diode (LED) and high intensity fluorescent (HIF) lighting and energy management systems. The ODS division focuses on selling its lighting products through manufacturer representative agencies and a network of broadline North American distributors.

FINANCIAL RATIOS  of  Orion Energy Systems (OESX)

Valuation Ratios
P/E Ratio -1.9
Price to Sales 0.3
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow -11.5
Price to Free Cash Flow -7.6
Growth Rates
Sales Growth Rate 2.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 20%
Total Debt to Equity 20%
Interest Coverage 0
Management Effectiveness
Return On Assets -18%
Ret/ On Assets - 3 Yr. Avg. -25.8%
Return On Total Capital -25.8%
Ret/ On T. Cap. - 3 Yr. Avg. -33.5%
Return On Equity -29.6%
Return On Equity - 3 Yr. Avg. -36.9%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 24.3%
Gross Margin - 3 Yr. Avg. 15.5%
EBITDA Margin -15.7%
EBITDA Margin - 3 Yr. Avg. -26%
Operating Margin -18.6%
Oper. Margin - 3 Yr. Avg. -30.8%
Pre-Tax Margin -18.6%
Pre-Tax Margin - 3 Yr. Avg. -30.8%
Net Profit Margin -17.1%
Net Profit Margin - 3 Yr. Avg. -30.3%
Effective Tax Rate 7.7%
Eff/ Tax Rate - 3 Yr. Avg. 2.6%
Payout Ratio 0%

OESX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OESX stock intrinsic value calculation we used $60.3 million for the last fiscal year's total revenue generated by Orion Energy Systems. The default revenue input number comes from 0001 income statement of Orion Energy Systems. 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 OESX stock valuation model: a) initial revenue growth rate of 10.1% 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 OESX is calculated based on our internal credit rating of Orion Energy Systems, 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 Energy Systems.
    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 OESX stock the variable cost ratio is equal to 93.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $18 million in the base year in the intrinsic value calculation for OESX 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 7.7% for Orion Energy Systems.

Corporate tax rate of 27% is the nominal tax rate for Orion Energy Systems. 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 OESX 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 OESX are equal to 25.2%.

Life of production assets of 8.4 years is the average useful life of capital assets used in Orion Energy Systems 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 OESX is equal to 6.1%. 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 - $23.424 million for Orion Energy Systems - 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 29.422 million for Orion Energy Systems 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 Energy Systems at the current share price and the inputted number of shares is $0.0 billion.

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COMPANY NEWS

▶ [$$] Orion Energy Makes Several Hires   [Oct-04-18 03:00PM  The Wall Street Journal]
▶ Orion Energy Systems, Inc. to Host Earnings Call   [Aug-07-18 08:00AM  ACCESSWIRE]
▶ Value-Adding Growth Stocks To Buy Now   [May-17-18 12:02PM  Simply Wall St.]
▶ April Top Growth Stocks To Buy   [Apr-16-18 12:02PM  Simply Wall St.]
▶ March Top Growth Stocks To Invest In   [Mar-16-18 12:02PM  Simply Wall St.]
▶ Top Growth Stocks To Buy Today   [Feb-11-18 11:02AM  Simply Wall St.]
▶ Orion Energy Systems, Inc. to Host Earnings Call   [Nov-02-17 09:05AM  ACCESSWIRE]
▶ [$$] Orion Energy Backs Future Energy Solutions With Credit Pact   [Apr-10-17 01:57PM  The Wall Street Journal]
▶ Weekly CFO Buys Highlights   [Feb-23-17 02:50PM  GuruFocus.com]

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