Intrinsic value of Omega Flex, Inc. - OFLX

Previous Close

$78.74

  Intrinsic Value

$32.23

stock screener

  Rating & Target

str. sell

-59%

Previous close

$78.74

 
Intrinsic value

$32.23

 
Up/down potential

-59%

 
Rating

str. sell

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 0.8

 

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, %
  5.10
  5.09
  5.08
  5.07
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
  5.02
  5.02
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.00
Revenue, $m
  114
  119
  125
  132
  138
  145
  153
  160
  169
  177
  186
  195
  205
  215
  226
  238
  250
  262
  275
  289
  303
  319
  335
  351
  369
  387
  407
  427
  449
  471
Variable operating expenses, $m
  82
  86
  90
  95
  100
  105
  110
  116
  121
  128
  134
  140
  147
  155
  162
  171
  179
  188
  198
  208
  218
  229
  240
  252
  265
  278
  292
  307
  322
  338
Fixed operating expenses, $m
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  8
  9
  9
  9
  9
  9
  10
Total operating expenses, $m
  87
  91
  95
  100
  106
  111
  116
  122
  127
  134
  140
  146
  154
  162
  169
  178
  186
  195
  206
  216
  226
  237
  248
  260
  274
  287
  301
  316
  331
  348
Operating income, $m
  26
  28
  30
  31
  33
  35
  37
  39
  41
  43
  46
  49
  51
  54
  57
  60
  63
  66
  70
  74
  78
  82
  86
  91
  95
  100
  106
  111
  117
  123
EBITDA, $m
  27
  29
  31
  32
  34
  36
  38
  40
  42
  44
  47
  49
  52
  55
  58
  61
  64
  68
  71
  75
  79
  83
  87
  92
  97
  102
  107
  113
  119
  125
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
Earnings before tax, $m
  26
  28
  29
  31
  33
  35
  36
  38
  40
  43
  45
  48
  50
  53
  56
  59
  62
  65
  68
  72
  76
  80
  84
  88
  93
  98
  103
  108
  114
  120
Tax expense, $m
  7
  8
  8
  8
  9
  9
  10
  10
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  18
  19
  20
  22
  23
  24
  25
  26
  28
  29
  31
  32
Net income, $m
  19
  20
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  47
  50
  53
  55
  58
  61
  64
  68
  71
  75
  79
  83
  87

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
  61
  64
  67
  71
  74
  78
  82
  86
  90
  95
  100
  105
  110
  116
  121
  127
  134
  140
  148
  155
  163
  171
  179
  188
  198
  208
  218
  229
  241
  253
Adjusted assets (=assets-cash), $m
  61
  64
  67
  71
  74
  78
  82
  86
  90
  95
  100
  105
  110
  116
  121
  127
  134
  140
  148
  155
  163
  171
  179
  188
  198
  208
  218
  229
  241
  253
Revenue / Adjusted assets
  1.869
  1.859
  1.866
  1.859
  1.865
  1.859
  1.866
  1.860
  1.878
  1.863
  1.860
  1.857
  1.864
  1.853
  1.868
  1.874
  1.866
  1.871
  1.858
  1.865
  1.859
  1.865
  1.872
  1.867
  1.864
  1.861
  1.867
  1.865
  1.863
  1.862
Average production assets, $m
  10
  10
  11
  12
  12
  13
  13
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  38
  39
  41
Working capital, $m
  8
  9
  9
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
  31
  33
  34
Total debt, $m
  1
  2
  3
  5
  6
  7
  9
  10
  12
  13
  15
  17
  19
  21
  23
  25
  27
  30
  32
  35
  38
  41
  44
  47
  50
  54
  58
  61
  66
  70
Total liabilities, $m
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  38
  39
  41
  44
  46
  48
  50
  53
  56
  58
  61
  64
  68
  71
  75
  78
  82
  86
  91
Total equity, $m
  39
  41
  43
  45
  48
  50
  52
  55
  58
  61
  64
  67
  70
  74
  78
  82
  86
  90
  95
  99
  104
  110
  115
  121
  127
  133
  140
  147
  154
  162
Total liabilities and equity, $m
  61
  64
  67
  70
  75
  78
  81
  86
  90
  95
  100
  105
  109
  115
  122
  128
  134
  140
  148
  155
  162
  171
  179
  189
  198
  208
  218
  229
  240
  253
Debt-to-equity ratio
  0.030
  0.050
  0.080
  0.100
  0.120
  0.140
  0.160
  0.180
  0.200
  0.220
  0.240
  0.250
  0.270
  0.280
  0.290
  0.310
  0.320
  0.330
  0.340
  0.350
  0.360
  0.370
  0.380
  0.390
  0.400
  0.400
  0.410
  0.420
  0.430
  0.430
Adjusted equity ratio
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  19
  20
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  47
  50
  53
  55
  58
  61
  64
  68
  71
  75
  79
  83
  87
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
Funds from operations, $m
  20
  21
  22
  24
  25
  26
  28
  29
  31
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  57
  60
  63
  66
  69
  73
  77
  81
  85
  89
Change in working capital, $m
  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
  1
  2
  2
Cash from operations, $m
  20
  21
  22
  23
  24
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  55
  58
  61
  65
  68
  72
  75
  79
  83
  88
Maintenance CAPEX, $m
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
New CAPEX, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
Cash from investing activities, $m
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -4
  -4
  -4
  -4
  -4
Free cash flow, $m
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  59
  62
  65
  68
  72
  76
  80
  84
Issuance/(repayment) of debt, $m
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
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  
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
Total cash flow (excl. dividends), $m
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  56
  59
  62
  65
  68
  72
  76
  80
  84
  88
Retained Cash Flow (-), $m
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
Prev. year cash balance distribution, $m
  29
  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
  47
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  35
  37
  39
  41
  44
  46
  48
  51
  53
  56
  59
  62
  66
  69
  73
  76
  80
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
  45
  17
  17
  17
  17
  17
  17
  16
  16
  15
  14
  14
  13
  12
  11
  10
  9
  8
  7
  6
  5
  4
  4
  3
  2
  2
  1
  1
  1
  1
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, Inc. (OFLX)

Valuation Ratios
P/E Ratio 56.7
Price to Sales 8.5
Price to Book 17.3
Price to Tangible Book
Price to Cash Flow 53
Price to Free Cash Flow 53
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 $108 million for the last fiscal year's total revenue generated by Omega Flex, Inc.. The default revenue input number comes from 0001 income statement of Omega Flex, Inc.. 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 5.1% 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 OFLX is calculated based on our internal credit rating of Omega Flex, Inc., 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, Inc..
    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 72.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $5 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, Inc..

Corporate tax rate of 27% is the nominal tax rate for Omega Flex, Inc.. 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 8.8%.

Life of production assets of 20.7 years is the average useful life of capital assets used in Omega Flex, Inc. 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 - $66.069 million for Omega Flex, Inc. - 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, Inc. 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, Inc. at the current share price and the inputted number of shares is $0.8 billion.

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