Intrinsic value of Ormat Technologies - ORA

Previous Close

$51.23

  Intrinsic Value

$14.27

stock screener

  Rating & Target

str. sell

-72%

Previous close

$51.23

 
Intrinsic value

$14.27

 
Up/down potential

-72%

 
Rating

str. sell

We calculate the intrinsic value of ORA 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 2.6

 

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, %
  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
  707
  723
  742
  762
  785
  811
  838
  868
  901
  935
  972
  1,012
  1,054
  1,098
  1,146
  1,196
  1,249
  1,305
  1,364
  1,427
  1,493
  1,563
  1,637
  1,714
  1,796
  1,882
  1,972
  2,067
  2,167
  2,273
Variable operating expenses, $m
  492
  503
  515
  530
  545
  563
  581
  602
  624
  647
  662
  688
  717
  747
  780
  814
  850
  888
  929
  971
  1,016
  1,064
  1,114
  1,167
  1,222
  1,281
  1,342
  1,407
  1,475
  1,547
Fixed operating expenses, $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 operating expenses, $m
  492
  503
  515
  530
  545
  563
  581
  602
  624
  647
  662
  688
  717
  747
  780
  814
  850
  888
  929
  971
  1,016
  1,064
  1,114
  1,167
  1,222
  1,281
  1,342
  1,407
  1,475
  1,547
Operating income, $m
  215
  220
  226
  233
  240
  248
  257
  267
  277
  288
  310
  323
  336
  351
  366
  382
  399
  417
  436
  456
  477
  499
  523
  547
  573
  601
  630
  660
  692
  726
EBITDA, $m
  341
  349
  358
  368
  379
  391
  404
  419
  434
  451
  469
  488
  508
  530
  552
  577
  602
  629
  658
  688
  720
  754
  789
  827
  866
  907
  951
  997
  1,045
  1,096
Interest expense (income), $m
  55
  53
  55
  57
  59
  61
  64
  67
  70
  74
  78
  82
  86
  91
  96
  101
  106
  112
  119
  125
  132
  140
  148
  156
  165
  174
  183
  193
  204
  215
  227
Earnings before tax, $m
  162
  166
  170
  174
  179
  184
  190
  197
  203
  210
  229
  237
  246
  255
  265
  275
  286
  298
  310
  323
  337
  352
  367
  383
  400
  418
  436
  456
  477
  499
Tax expense, $m
  44
  45
  46
  47
  48
  50
  51
  53
  55
  57
  62
  64
  66
  69
  72
  74
  77
  80
  84
  87
  91
  95
  99
  103
  108
  113
  118
  123
  129
  135
Net income, $m
  118
  121
  124
  127
  131
  135
  139
  143
  148
  154
  167
  173
  179
  186
  193
  201
  209
  218
  227
  236
  246
  257
  268
  280
  292
  305
  319
  333
  348
  364

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
  2,677
  2,738
  2,809
  2,888
  2,975
  3,071
  3,176
  3,289
  3,411
  3,542
  3,682
  3,832
  3,991
  4,160
  4,339
  4,529
  4,731
  4,943
  5,168
  5,406
  5,656
  5,921
  6,199
  6,493
  6,802
  7,127
  7,470
  7,830
  8,210
  8,608
Adjusted assets (=assets-cash), $m
  2,677
  2,738
  2,809
  2,888
  2,975
  3,071
  3,176
  3,289
  3,411
  3,542
  3,682
  3,832
  3,991
  4,160
  4,339
  4,529
  4,731
  4,943
  5,168
  5,406
  5,656
  5,921
  6,199
  6,493
  6,802
  7,127
  7,470
  7,830
  8,210
  8,608
Revenue / Adjusted assets
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
  0.264
Average production assets, $m
  2,026
  2,073
  2,126
  2,186
  2,252
  2,325
  2,404
  2,490
  2,582
  2,681
  2,787
  2,900
  3,020
  3,148
  3,284
  3,428
  3,581
  3,742
  3,912
  4,092
  4,281
  4,481
  4,692
  4,914
  5,148
  5,395
  5,654
  5,927
  6,214
  6,516
Working capital, $m
  52
  53
  55
  56
  58
  60
  62
  64
  67
  69
  72
  75
  78
  81
  85
  88
  92
  97
  101
  106
  111
  116
  121
  127
  133
  139
  146
  153
  160
  168
Total debt, $m
  941
  974
  1,012
  1,055
  1,102
  1,153
  1,210
  1,271
  1,336
  1,407
  1,482
  1,562
  1,648
  1,739
  1,836
  1,938
  2,046
  2,161
  2,282
  2,409
  2,544
  2,686
  2,836
  2,994
  3,161
  3,336
  3,520
  3,714
  3,918
  4,132
Total liabilities, $m
  1,440
  1,473
  1,511
  1,554
  1,601
  1,652
  1,709
  1,770
  1,835
  1,906
  1,981
  2,061
  2,147
  2,238
  2,334
  2,437
  2,545
  2,660
  2,781
  2,908
  3,043
  3,185
  3,335
  3,493
  3,659
  3,834
  4,019
  4,213
  4,417
  4,631
Total equity, $m
  1,237
  1,265
  1,298
  1,334
  1,375
  1,419
  1,467
  1,520
  1,576
  1,636
  1,701
  1,770
  1,844
  1,922
  2,005
  2,093
  2,186
  2,284
  2,388
  2,498
  2,613
  2,735
  2,864
  3,000
  3,142
  3,293
  3,451
  3,618
  3,793
  3,977
Total liabilities and equity, $m
  2,677
  2,738
  2,809
  2,888
  2,976
  3,071
  3,176
  3,290
  3,411
  3,542
  3,682
  3,831
  3,991
  4,160
  4,339
  4,530
  4,731
  4,944
  5,169
  5,406
  5,656
  5,920
  6,199
  6,493
  6,801
  7,127
  7,470
  7,831
  8,210
  8,608
Debt-to-equity ratio
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.820
  0.840
  0.850
  0.860
  0.870
  0.880
  0.890
  0.900
  0.920
  0.930
  0.940
  0.950
  0.960
  0.960
  0.970
  0.980
  0.990
  1.000
  1.010
  1.010
  1.020
  1.030
  1.030
  1.040
Adjusted equity ratio
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462
  0.462

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  118
  121
  124
  127
  131
  135
  139
  143
  148
  154
  167
  173
  179
  186
  193
  201
  209
  218
  227
  236
  246
  257
  268
  280
  292
  305
  319
  333
  348
  364
Depreciation, amort., depletion, $m
  126
  128
  131
  135
  139
  143
  147
  152
  157
  163
  158
  165
  172
  179
  187
  195
  203
  213
  222
  232
  243
  255
  267
  279
  293
  307
  321
  337
  353
  370
Funds from operations, $m
  244
  249
  255
  262
  269
  277
  286
  296
  306
  317
  325
  338
  351
  365
  380
  396
  413
  430
  449
  469
  489
  511
  534
  559
  584
  611
  640
  670
  701
  734
Change in working capital, $m
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
Cash from operations, $m
  243
  248
  254
  260
  268
  275
  284
  293
  303
  314
  323
  335
  348
  362
  377
  392
  409
  426
  444
  464
  484
  506
  529
  553
  578
  605
  633
  663
  694
  726
Maintenance CAPEX, $m
  -113
  -115
  -118
  -121
  -124
  -128
  -132
  -137
  -141
  -147
  -152
  -158
  -165
  -172
  -179
  -187
  -195
  -203
  -213
  -222
  -232
  -243
  -255
  -267
  -279
  -293
  -307
  -321
  -337
  -353
New CAPEX, $m
  -39
  -47
  -53
  -60
  -66
  -73
  -79
  -86
  -92
  -99
  -106
  -113
  -120
  -128
  -136
  -144
  -152
  -161
  -170
  -180
  -190
  -200
  -211
  -222
  -234
  -246
  -259
  -273
  -287
  -302
Cash from investing activities, $m
  -152
  -162
  -171
  -181
  -190
  -201
  -211
  -223
  -233
  -246
  -258
  -271
  -285
  -300
  -315
  -331
  -347
  -364
  -383
  -402
  -422
  -443
  -466
  -489
  -513
  -539
  -566
  -594
  -624
  -655
Free cash flow, $m
  91
  86
  83
  80
  77
  75
  73
  71
  70
  68
  64
  63
  63
  62
  62
  62
  61
  62
  62
  62
  62
  63
  64
  64
  65
  66
  67
  69
  70
  71
Issuance/(repayment) of debt, $m
  28
  33
  38
  43
  47
  52
  56
  61
  66
  70
  75
  80
  86
  91
  97
  102
  108
  115
  121
  128
  135
  142
  150
  158
  166
  175
  184
  194
  204
  215
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  
  28
  33
  38
  43
  47
  52
  56
  61
  66
  70
  75
  80
  86
  91
  97
  102
  108
  115
  121
  128
  135
  142
  150
  158
  166
  175
  184
  194
  204
  215
Total cash flow (excl. dividends), $m
  119
  120
  121
  122
  124
  126
  129
  132
  135
  139
  140
  144
  148
  153
  158
  164
  170
  176
  183
  190
  197
  205
  213
  222
  231
  241
  252
  262
  274
  286
Retained Cash Flow (-), $m
  -25
  -28
  -33
  -37
  -40
  -44
  -48
  -52
  -56
  -60
  -65
  -69
  -74
  -78
  -83
  -88
  -93
  -98
  -104
  -110
  -116
  -122
  -129
  -136
  -143
  -150
  -158
  -167
  -175
  -184
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
  94
  91
  88
  86
  84
  82
  81
  80
  79
  78
  75
  75
  75
  75
  75
  76
  77
  78
  79
  80
  81
  83
  85
  87
  89
  91
  93
  96
  99
  102
Discount rate, %
  6.10
  6.41
  6.73
  7.06
  7.41
  7.79
  8.17
  8.58
  9.01
  9.46
  9.94
  10.43
  10.95
  11.50
  12.08
  12.68
  13.32
  13.98
  14.68
  15.41
  16.19
  16.99
  17.84
  18.74
  19.67
  20.66
  21.69
  22.77
  23.91
  25.11
PV of cash for distribution, $m
  88
  80
  73
  65
  59
  52
  47
  41
  36
  32
  26
  23
  19
  16
  14
  11
  9
  7
  6
  5
  3
  3
  2
  1
  1
  1
  0
  0
  0
  0
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

Ormat Technologies, Inc. is engaged in the geothermal and recovered energy power business. The Company designs, develops, builds, owns and operates geothermal and recovered energy-based power plants. Its equipment manufacturing operations are located in Israel. It conducts its business activities in two business segments: Electricity segment and Product segment. The Electricity segment develops, builds, owns and operates geothermal and recovered energy-based power plants in the United States and geothermal power plants in other countries around the world, and sells the electricity it generates. The Product Segment designs, manufactures and sells equipment for geothermal and recovered energy-based electricity generation and remote power units, and provide services relating to the engineering, procurement, construction, operation and maintenance of geothermal, and recovered energy-based power plants. It manufactures products that produce electricity from recovered energy or waste heat.

FINANCIAL RATIOS  of  Ormat Technologies (ORA)

Valuation Ratios
P/E Ratio 27.1
Price to Sales 3.8
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 16
Price to Free Cash Flow 363.5
Growth Rates
Sales Growth Rate 11.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -5.8%
Financial Strength
Quick Ratio 3
Current Ratio 0.2
LT Debt to Equity 81%
Total Debt to Equity 87.1%
Interest Coverage 4
Management Effectiveness
Return On Assets 5.8%
Ret/ On Assets - 3 Yr. Avg. 6.2%
Return On Total Capital 4.8%
Ret/ On T. Cap. - 3 Yr. Avg. 4.8%
Return On Equity 9.1%
Return On Equity - 3 Yr. Avg. 10%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 40.9%
Gross Margin - 3 Yr. Avg. 38%
EBITDA Margin 45.6%
EBITDA Margin - 3 Yr. Avg. 45.5%
Operating Margin 30.5%
Oper. Margin - 3 Yr. Avg. 27.9%
Pre-Tax Margin 21.3%
Pre-Tax Margin - 3 Yr. Avg. 18.6%
Net Profit Margin 14.2%
Net Profit Margin - 3 Yr. Avg. 14.7%
Effective Tax Rate 22.7%
Eff/ Tax Rate - 3 Yr. Avg. 14%
Payout Ratio 27.7%

ORA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ORA stock intrinsic value calculation we used $692.812 million for the last fiscal year's total revenue generated by Ormat Technologies. The default revenue input number comes from 0001 income statement of Ormat Technologies. 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 ORA 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 6.1%, whose default value for ORA is calculated based on our internal credit rating of Ormat Technologies, 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 Ormat Technologies.
    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 ORA stock the variable cost ratio is equal to 69.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ORA 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 5.8% for Ormat Technologies.

Corporate tax rate of 27% is the nominal tax rate for Ormat Technologies. 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 ORA 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 ORA are equal to 286.7%.

Life of production assets of 17.6 years is the average useful life of capital assets used in Ormat Technologies 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 ORA is equal to 7.4%. 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 - $1211.378 million for Ormat Technologies - 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 50.63 million for Ormat Technologies 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 Ormat Technologies at the current share price and the inputted number of shares is $2.6 billion.

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COMPANY NEWS

▶ Ormat Technologies: 3Q Earnings Snapshot   [06:39AM  Associated Press]
▶ Ormat Technologies: 2Q Earnings Snapshot   [05:04AM  Associated Press]

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