Intrinsic value of Omega Flex - OFLX

Previous Close

$58.67

  Intrinsic Value

$54.07

stock screener

  Rating & Target

hold

-8%

Previous close

$58.67

 
Intrinsic value

$54.07

 
Up/down potential

-8%

 
Rating

hold

We calculate the intrinsic value of OFLX 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 0.6

 

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, %
  12.80
  12.02
  11.32
  10.69
  10.12
  9.61
  9.15
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
  6.78
  6.61
  6.45
  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
Revenue, $m
  115
  129
  143
  158
  175
  191
  209
  227
  246
  266
  286
  308
  330
  353
  377
  402
  427
  454
  482
  512
  542
  574
  607
  641
  677
  715
  754
  796
  839
  884
Variable operating expenses, $m
  72
  81
  90
  99
  109
  120
  131
  142
  154
  166
  178
  192
  206
  220
  235
  250
  267
  283
  301
  319
  338
  358
  378
  400
  422
  446
  470
  496
  523
  551
Fixed operating expenses, $m
  14
  15
  15
  15
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  24
  25
  25
  26
  26
  27
Total operating expenses, $m
  86
  96
  105
  114
  125
  136
  147
  159
  171
  183
  196
  210
  225
  239
  254
  270
  287
  304
  322
  341
  360
  381
  401
  424
  446
  471
  495
  522
  549
  578
Operating income, $m
  29
  33
  39
  44
  50
  56
  62
  68
  75
  82
  90
  98
  106
  114
  122
  131
  141
  150
  160
  171
  182
  193
  205
  218
  231
  245
  259
  274
  289
  306
EBITDA, $m
  29
  34
  40
  45
  51
  57
  63
  70
  77
  84
  91
  99
  107
  115
  124
  133
  142
  152
  162
  173
  184
  196
  208
  220
  234
  247
  262
  277
  293
  309
Interest expense (income), $m
  0
  0
  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
  7
  8
  8
Earnings before tax, $m
  29
  33
  38
  44
  49
  55
  61
  67
  74
  81
  88
  95
  103
  111
  120
  128
  137
  147
  156
  167
  177
  188
  200
  212
  225
  238
  252
  266
  281
  297
Tax expense, $m
  8
  9
  10
  12
  13
  15
  16
  18
  20
  22
  24
  26
  28
  30
  32
  35
  37
  40
  42
  45
  48
  51
  54
  57
  61
  64
  68
  72
  76
  80
Net income, $m
  21
  24
  28
  32
  36
  40
  44
  49
  54
  59
  64
  70
  75
  81
  87
  94
  100
  107
  114
  122
  129
  137
  146
  155
  164
  174
  184
  194
  205
  217

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
  64
  72
  80
  89
  98
  107
  117
  127
  138
  149
  161
  173
  185
  198
  211
  225
  240
  255
  271
  287
  304
  322
  341
  360
  380
  402
  424
  447
  471
  496
Adjusted assets (=assets-cash), $m
  64
  72
  80
  89
  98
  107
  117
  127
  138
  149
  161
  173
  185
  198
  211
  225
  240
  255
  271
  287
  304
  322
  341
  360
  380
  402
  424
  447
  471
  496
Revenue / Adjusted assets
  1.797
  1.792
  1.788
  1.775
  1.786
  1.785
  1.786
  1.787
  1.783
  1.785
  1.776
  1.780
  1.784
  1.783
  1.787
  1.787
  1.779
  1.780
  1.779
  1.784
  1.783
  1.783
  1.780
  1.781
  1.782
  1.779
  1.778
  1.781
  1.781
  1.782
Average production assets, $m
  8
  9
  10
  12
  13
  14
  15
  17
  18
  19
  21
  22
  24
  26
  27
  29
  31
  33
  35
  37
  40
  42
  44
  47
  49
  52
  55
  58
  61
  65
Working capital, $m
  8
  9
  10
  12
  13
  14
  15
  17
  18
  19
  21
  22
  24
  26
  27
  29
  31
  33
  35
  37
  40
  42
  44
  47
  49
  52
  55
  58
  61
  65
Total debt, $m
  3
  6
  9
  12
  15
  19
  23
  27
  31
  35
  39
  44
  48
  53
  58
  64
  69
  75
  81
  87
  93
  100
  107
  114
  122
  130
  138
  147
  156
  166
Total liabilities, $m
  24
  27
  30
  34
  37
  41
  44
  48
  52
  56
  61
  65
  70
  75
  80
  85
  91
  96
  102
  109
  115
  122
  129
  136
  144
  152
  160
  169
  178
  188
Total equity, $m
  40
  45
  50
  55
  61
  67
  73
  79
  86
  93
  100
  107
  115
  123
  132
  140
  149
  159
  168
  179
  189
  200
  212
  224
  237
  250
  263
  278
  293
  309
Total liabilities and equity, $m
  64
  72
  80
  89
  98
  108
  117
  127
  138
  149
  161
  172
  185
  198
  212
  225
  240
  255
  270
  288
  304
  322
  341
  360
  381
  402
  423
  447
  471
  497
Debt-to-equity ratio
  0.070
  0.130
  0.180
  0.220
  0.250
  0.280
  0.310
  0.330
  0.360
  0.370
  0.390
  0.410
  0.420
  0.430
  0.440
  0.450
  0.460
  0.470
  0.480
  0.490
  0.490
  0.500
  0.510
  0.510
  0.520
  0.520
  0.530
  0.530
  0.530
  0.540
Adjusted equity ratio
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622
  0.622

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  21
  24
  28
  32
  36
  40
  44
  49
  54
  59
  64
  70
  75
  81
  87
  94
  100
  107
  114
  122
  129
  137
  146
  155
  164
  174
  184
  194
  205
  217
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
Funds from operations, $m
  22
  25
  29
  33
  37
  41
  46
  50
  55
  60
  65
  71
  77
  83
  89
  95
  102
  109
  116
  124
  132
  140
  148
  157
  167
  177
  187
  198
  209
  221
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
Cash from operations, $m
  21
  24
  28
  32
  36
  40
  44
  49
  54
  59
  64
  69
  75
  81
  87
  93
  100
  107
  114
  122
  129
  137
  146
  155
  164
  174
  184
  195
  206
  217
Maintenance CAPEX, $m
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
Cash from investing activities, $m
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -6
  -6
  -6
  -6
  -6
  -6
Free cash flow, $m
  19
  23
  26
  30
  34
  38
  42
  47
  52
  56
  61
  67
  72
  78
  84
  90
  96
  103
  110
  117
  125
  133
  141
  150
  159
  168
  178
  189
  199
  211
Issuance/(repayment) of debt, $m
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
Total cash flow (excl. dividends), $m
  22
  26
  29
  33
  37
  42
  46
  51
  56
  61
  66
  71
  77
  83
  89
  95
  102
  109
  116
  124
  132
  140
  148
  157
  167
  176
  187
  197
  208
  220
Retained Cash Flow (-), $m
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
Prev. year cash balance distribution, $m
  20
  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
  37
  21
  24
  28
  32
  36
  40
  44
  49
  54
  59
  64
  69
  75
  81
  87
  93
  100
  106
  113
  121
  129
  137
  145
  154
  163
  173
  183
  193
  204
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
  36
  19
  21
  23
  25
  26
  27
  28
  28
  28
  28
  27
  26
  25
  24
  22
  20
  18
  16
  14
  13
  11
  9
  7
  6
  5
  4
  3
  2
  2
Current shareholders' claim on cash, %
  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 Flex, Inc. is a manufacturer of flexible metal hose. The Company is engaged in a range of different markets, including construction, manufacturing, transportation, petrochemical, pharmaceutical and other industries. It operates through manufacture and sale of flexible metal hose and accessories segment. Its products are concentrated in residential and commercial construction, and general industrial markets. Its primary product, flexible gas piping, is used for gas piping within residential and commercial buildings. Its TracPipe and TracPipe CounterStrike flexible gas piping, along with its fittings, which are distributed under AutoSnap and AutoFlare names. Its products are manufactured at its Exton, Pennsylvania facilities in the United States, and in Banbury, Oxfordshire in the United Kingdom. It has sales across all industries are generated through independent outside sales organizations, such as sales representatives, wholesalers and distributors or a combination of both.

FINANCIAL RATIOS  of  Omega Flex (OFLX)

Valuation Ratios
P/E Ratio 42.3
Price to Sales 6.3
Price to Book 12.9
Price to Tangible Book
Price to Cash Flow 39.5
Price to Free Cash Flow 39.5
Growth Rates
Sales Growth Rate 1.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -100%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 20.4%
Ret/ On Assets - 3 Yr. Avg. 24.8%
Return On Total Capital 32.2%
Ret/ On T. Cap. - 3 Yr. Avg. 39.4%
Return On Equity 32.2%
Return On Equity - 3 Yr. Avg. 39.4%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 61.7%
Gross Margin - 3 Yr. Avg. 60.6%
EBITDA Margin 23.4%
EBITDA Margin - 3 Yr. Avg. 24.6%
Operating Margin 23.4%
Oper. Margin - 3 Yr. Avg. 23.9%
Pre-Tax Margin 23.4%
Pre-Tax Margin - 3 Yr. Avg. 24.6%
Net Profit Margin 14.9%
Net Profit Margin - 3 Yr. Avg. 15.8%
Effective Tax Rate 31.8%
Eff/ Tax Rate - 3 Yr. Avg. 32.8%
Payout Ratio 64.3%

OFLX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the OFLX stock intrinsic value calculation we used $101.799 million for the last fiscal year's total revenue generated by Omega Flex. The default revenue input number comes from 0001 income statement of Omega Flex. 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 OFLX stock valuation model: a) initial revenue growth rate of 12.8% 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 OFLX is calculated based on our internal credit rating of Omega Flex, 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 Flex.
    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 OFLX stock the variable cost ratio is equal to 62.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $14 million in the base year in the intrinsic value calculation for OFLX 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 5.4% for Omega Flex.

Corporate tax rate of 27% is the nominal tax rate for Omega Flex. 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 OFLX 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 OFLX are equal to 7.3%.

Life of production assets of 18.4 years is the average useful life of capital assets used in Omega Flex 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 OFLX is equal to 7.3%. 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 - $55.458 million for Omega Flex - 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 10.092 million for Omega Flex 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 Flex at the current share price and the inputted number of shares is $0.6 billion.

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COMPANY NEWS

▶ Omega Flex: 3Q Earnings Snapshot   [Oct-18-18 05:14PM  Associated Press]
▶ Omega Flex, Inc. Announces September 2018 Dividend   [Sep-11-18 04:15PM  GlobeNewswire]
▶ Omega Flex: 2Q Earnings Snapshot   [Jul-19-18 05:07PM  Associated Press]
▶ Omega Flex, Inc. Announces Quarterly Dividend   [Jun-06-18 05:15PM  GlobeNewswire]
▶ Omega Flex: 1Q Earnings Snapshot   [Apr-19-18 05:22PM  Associated Press]
▶ Omega Flex, Inc. Announces Quarterly Dividend   [Apr-10-18 04:15PM  GlobeNewswire]
▶ Omega Flex posts 4Q profit   [Feb-09-18 05:01AM  Associated Press]
▶ Omega Flex, Inc. Announces Fourth Quarter 2017 Earnings   [Feb-08-18 04:47PM  GlobeNewswire]
▶ Omega Flex, Inc. Announces Quarterly Dividend   [Dec-13-17 04:15PM  GlobeNewswire]
▶ Omega Flex posts 3Q profit   [Oct-19-17 05:00PM  Associated Press]
▶ Omega Flex, Inc. Announces Quarterly Dividend   [Sep-11-17 04:20PM  GlobeNewswire]
▶ Omega Flex posts 2Q profit   [Jul-20-17 09:32PM  Associated Press]
▶ ETFs with exposure to Omega Flex, Inc. : July 11, 2017   [Jul-11-17 02:52PM  Capital Cube]
▶ ETFs with exposure to Omega Flex, Inc. : June 19, 2017   [Jun-19-17 03:52PM  Capital Cube]
▶ Omega Flex, Inc. Announces Intention to Launch New Product   [Jun-12-17 04:30PM  GlobeNewswire]
▶ Omega Flex, Inc. Announces Quarterly Dividend   [Jun-09-17 04:20PM  GlobeNewswire]
▶ Omega Flex posts 1Q profit   [Apr-20-17 04:40PM  Associated Press]
▶ Omega Flex posts 4Q profit   [Feb-10-17 04:42PM  Associated Press]
▶ Omega Flex, Inc. Announces Special Dividend   [Dec-14-16 04:34PM  GlobeNewswire]
▶ Omega Flex: A Play on the Housing Market   [01:32PM  GuruFocus.com]
▶ ETFs with exposure to Omega Flex, Inc. : August 23, 2016   [Aug-23-16 12:15PM  Capital Cube]
▶ Omega Flex, Inc. Announces a Special Dividend Issued   [Dec-10  05:00PM  GlobeNewswire]

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