Omega Flex, Inc. (OFLX) Bundle
Understanding Omega Flex, Inc. (OFLX) Revenue Streams
Understanding Omega Flex, Inc. (OFLX)’s Revenue Streams
The primary revenue sources for Omega Flex, Inc. include sales from flexible metal hose and braid products, which are utilized in various industries such as aerospace, automotive, and industrial markets.
Breakdown of Primary Revenue Sources
- Net Sales (2024 Q3): $24,880,000
- Net Sales (2023 Q3): $27,496,000
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for the third quarter of 2024 compared to 2023 reflects a decrease of 9.5%.
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 30, 2024, the overall revenue breakdown is as follows:
| Period | Net Sales ($000) | Gross Profit ($000) | Operating Profit ($000) |
|---|---|---|---|
| 2024 | $74,716 | $45,671 | $15,809 |
| 2023 | $83,318 | $51,375 | $19,686 |
Analysis of Significant Changes in Revenue Streams
The company experienced a decrease in net sales of $8,602,000 or 10.3% for the nine months ended September 30, 2024, compared to the same period in 2023. This decline is attributed primarily to lower sales unit volumes, influenced by a suppressed overall market and a decline in housing starts.
Moreover, the gross profit margin for the nine months ended September 30, 2024 was 61.1%, down from 61.7% in 2023, primarily due to lower production and higher overhead expenses from newly leased facilities.
A Deep Dive into Omega Flex, Inc. (OFLX) Profitability
A Deep Dive into Omega Flex, Inc.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit was $15,350,000, resulting in a gross profit margin of 61.7%. In comparison, for the same period in 2023, the gross profit was $16,947,000 with a margin of 61.6%.
Operating Profit Margin: The operating profit for the three months ended September 30, 2024, stood at $5,468,000, yielding an operating profit margin of 22.0%. This is a decrease from the $6,859,000 operating profit and 24.9% margin reported in the same quarter of 2023.
Net Profit: The net income for the third quarter of 2024 was $4,596,000, compared to $5,574,000 in 2023. This reflects a net profit margin of 18.5% for 2024 and 20.3% for 2023.
Trends in Profitability Over Time
| Period | Net Sales ($000) | Gross Profit ($000) | Operating Profit ($000) | Net Income ($000) | Gross Profit Margin (%) | Operating Profit Margin (%) | Net Profit Margin (%) |
|---|---|---|---|---|---|---|---|
| Q3 2024 | $24,880 | $15,350 | $5,468 | $4,596 | 61.7% | 22.0% | 18.5% |
| Q3 2023 | $27,496 | $16,947 | $6,859 | $5,574 | 61.6% | 24.9% | 20.3% |
| 9M 2024 | $74,716 | $45,671 | $15,809 | $13,270 | 61.1% | 21.2% | 17.7% |
| 9M 2023 | $83,318 | $51,375 | $19,686 | $15,865 | 61.7% | 23.6% | 19.0% |
Comparison of Profitability Ratios with Industry Averages
As of 2024, the gross profit margin of 61.7% exceeds the industry average of approximately 50%. The operating profit margin of 22.0% is also higher than the industry average, which typically ranges between 15% to 20%. The net profit margin of 18.5% is above the industry standard of around 10% to 15%.
Analysis of Operational Efficiency
Operational efficiency can be assessed through the trends in gross margin and the management of costs. The gross margin has seen a slight decline from 61.7% in 2023 to 61.1% in 2024, attributed to increased overhead costs and lower production rates. Selling expenses were $4,976,000 for Q3 2024, representing 20.0% of net sales, an increase from 18.4% in Q3 2023. General and administrative expenses decreased to $3,848,000, or 15.5% of net sales in Q3 2024, down from 14.7% in Q3 2023.
Engineering expenses rose to $1,058,000 in Q3 2024, which is 4.3% of net sales, compared to 3.6% in Q3 2023. This reflects a focus on product development amid a challenging market environment.
Debt vs. Equity: How Omega Flex, Inc. (OFLX) Finances Its Growth
Debt vs. Equity: How Omega Flex, Inc. Finances Its Growth
The company’s financial strategy incorporates both debt and equity to support its operations and growth. Analyzing the current debt levels provides insight into how Omega Flex, Inc. manages its financial obligations and capital structure.
Overview of the Company's Debt Levels
As of September 30, 2024, Omega Flex reported total liabilities of $20,785,000, which is a slight decrease from $21,382,000 as of December 31, 2023. The company maintains a line of credit of $15,000,000, with no borrowings outstanding. The breakdown of the company’s liabilities includes:
| Type of Debt | Amount ($) | Current Portion ($) |
|---|---|---|
| Long-term Debt | 0 | 0 |
| Short-term Debt | 0 | 0 |
| Lease Liabilities | 5,655,000 | 755,000 |
| Other Liabilities | 403,000 | 140,000 |
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio is a critical indicator of financial leverage. For Omega Flex, the debt-to-equity ratio is calculated as follows:
Debt-to-Equity Ratio = Total Liabilities / Shareholders' Equity
With total liabilities at $20,785,000 and total shareholders' equity at $82,085,000 as of September 30, 2024, the calculation yields:
Debt-to-Equity Ratio = $20,785,000 / $82,085,000 = 0.253
This ratio is significantly lower than the industry average of approximately 1.0, indicating a conservative approach to leveraging debt.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
As of the latest financial statements, Omega Flex has not engaged in any recent debt issuances or significant refinancing activities. The company’s credit rating remains stable, reflecting its management of cash flows and absence of long-term debt.
Balancing Between Debt Financing and Equity Funding
The company has primarily relied on equity financing, with retained earnings amounting to $71,630,000 as of September 30, 2024. This financing strategy is complemented by consistent dividend payments, which totaled $10,095,000 in 2024. The following table summarizes the dividends declared:
| Dividend Declared Date | Price Per Share ($) | Amount Paid ($) |
|---|---|---|
| September 11, 2024 | 0.34 | 3,432,000 |
| June 12, 2024 | 0.34 | 3,432,000 |
| March 28, 2024 | 0.33 | 3,331,000 |
| December 6, 2023 | 0.33 | 3,332,000 |
This strategic balance between debt and equity allows Omega Flex to maintain financial flexibility while supporting its growth initiatives without over-leveraging the company.
Assessing Omega Flex, Inc. (OFLX) Liquidity
Assessing Omega Flex, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is calculated as follows:
| Current Assets | Current Liabilities | Current Ratio |
|---|---|---|
| $61,017,000 | $20,785,000 | 2.93 |
Quick Ratio: The quick ratio, which excludes inventory from current assets, is:
| Cash and Cash Equivalents | Accounts Receivable | Current Liabilities | Quick Ratio |
|---|---|---|---|
| $45,873,000 | $14,144,000 | $20,785,000 | 2.93 |
Working Capital Trends: The working capital increased from:
| Date | Working Capital |
|---|---|
| September 30, 2023 | $56,936,000 |
| September 30, 2024 | $40,232,000 |
Cash Flow Overview: The cash flow statements for the nine months ended September 30, 2024, show the following trends:
| Cash Flow Type | Amount (in thousands) |
|---|---|
| Operating Activities | $11,097 |
| Investing Activities | ($1,443) |
| Financing Activities | ($10,095) |
Potential Liquidity Concerns: The company has experienced a decrease in cash flow from operating activities compared to the previous year, with a decline of:
- $399,000 from $11,496,000 in 2023 to $11,097,000 in 2024.
Strengths: The company maintains a strong cash balance of:
| Date | Cash Balance |
|---|---|
| September 30, 2024 | $45,873,000 |
| December 31, 2023 | $46,356,000 |
Debt Management: The company had no borrowings against its $15,000,000 line of credit as of September 30, 2024.
Future Capital Requirements: The company expects its cash and cash equivalents, along with its borrowing capacity, to meet its anticipated cash needs for the next twelve months.
Is Omega Flex, Inc. (OFLX) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine key valuation ratios, recent stock price trends, dividend metrics, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a crucial metric for evaluating stock valuation. As of September 30, 2024, the company's earnings per share (EPS) was $1.32. If the current stock price is $63.00, the P/E ratio can be calculated as follows:
P/E Ratio = Stock Price / EPS = $63.00 / $1.32 = 47.73
Price-to-Book (P/B) Ratio
The P/B ratio compares a company's market value to its book value. The company's book value per share, calculated from total shareholders' equity of $82,085,000 and outstanding shares of 10,094,322, is:
Book Value per Share = Total Shareholders’ Equity / Outstanding Shares = $82,085,000 / 10,094,322 = $8.13
Thus, the P/B ratio is:
P/B Ratio = Stock Price / Book Value per Share = $63.00 / $8.13 = 7.75
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio provides insight into the company's valuation relative to its earnings. The company's EBITDA for the last twelve months is estimated at $19,686,000. The enterprise value (EV) can be calculated as follows:
- Market Capitalization = Stock Price x Outstanding Shares = $63.00 x 10,094,322 = $635,927,746
- Total Debt = $0 (no borrowings)
- Cash = $45,873,000
- EV = Market Capitalization + Total Debt - Cash = $635,927,746 + $0 - $45,873,000 = $590,054,746
Thus, the EV/EBITDA ratio is:
EV/EBITDA = EV / EBITDA = $590,054,746 / $19,686,000 = 29.96
Stock Price Trends
Over the last 12 months, the stock price has shown the following trends:
- 12 months ago: $65.00
- 6 months ago: $60.00
- Current Price: $63.00
The stock has oscillated between a high of $70.00 and a low of $55.00.
Dividend Yield and Payout Ratios
The company declared dividends totaling $10,195,000 for the nine months ended September 30, 2024. The dividend per share is:
Dividend per Share = Total Dividends / Outstanding Shares = $10,195,000 / 10,094,322 = $1.01
The current dividend yield is:
Dividend Yield = Dividend per Share / Stock Price = $1.01 / $63.00 = 1.60%
The payout ratio based on the net income of $13,270,000 is:
Payout Ratio = Total Dividends / Net Income = $10,195,000 / $13,270,000 = 76.8%
Analyst Consensus on Stock Valuation
Analyst consensus indicates a rating of:
- Buy: 5 analysts
- Hold: 3 analysts
- Sell: 1 analyst
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 47.73 |
| P/B Ratio | 7.75 |
| EV/EBITDA Ratio | 29.96 |
| Current Stock Price | $63.00 |
| Dividend Yield | 1.60% |
| Payout Ratio | 76.8% |
| Analyst Consensus | Buy |
Key Risks Facing Omega Flex, Inc. (OFLX)
Key Risks Facing Omega Flex, Inc.
Omega Flex, Inc. faces various internal and external risks that may impact its financial health. These risks include industry competition, regulatory changes, and market conditions that can significantly affect operations and profitability.
Industry Competition
The company operates in a highly competitive industry, which can lead to pricing pressures and reduced market share. For the nine months ended September 30, 2024, net sales decreased by $8,602,000 or 10.3% compared to the same period in 2023, primarily due to lower sales unit volumes as a result of market suppression.
Regulatory Changes
Changes in regulations, particularly those related to manufacturing and environmental standards, can impose additional costs or operational constraints. As of September 30, 2024, the company had total liabilities amounting to $20,785,000.
Market Conditions
Market conditions such as a decline in housing starts have contributed to the decrease in sales. The company's gross profit margin for the first nine months of 2024 was 61.1%, down from 61.7% in 2023.
Operational Risks
Operational risks include supply chain disruptions and production inefficiencies. Engineering expenses increased to $2,973,000 for the nine months ended September 30, 2024, up from $2,854,000 in the prior year.
Financial Risks
Financial risks include fluctuations in interest rates and foreign currency exchange rates. The company recorded $1,741,000 in interest income for the first nine months of 2024, which reflects higher cash balances and interest rates.
Strategic Risks
Strategic risks involve potential failures in executing business plans or adapting to market changes. The company’s net income for the nine months ended September 30, 2024, was $13,270,000, down from $15,865,000 in 2023.
Mitigation Strategies
To mitigate these risks, Omega Flex has implemented several strategies, including diversifying its product offerings and enhancing operational efficiencies. The company maintains a cash balance of $45,873,000 as of September 30, 2024, which provides a buffer against market volatility.
| Risk Type | Description | Financial Impact |
|---|---|---|
| Industry Competition | High competition leading to pricing pressures | Net sales decreased by $8,602,000 or 10.3% |
| Regulatory Changes | Compliance with changing regulations | Total liabilities of $20,785,000 |
| Market Conditions | Market suppression due to economic factors | Gross profit margin decreased to 61.1% |
| Operational Risks | Supply chain and production efficiencies | Engineering expenses increased to $2,973,000 |
| Financial Risks | Interest rate and currency fluctuations | Interest income of $1,741,000 |
| Strategic Risks | Failure to execute business plans | Net income decreased to $13,270,000 |
The company's ability to navigate these risks effectively will be crucial for its ongoing financial health and operational success.
Future Growth Prospects for Omega Flex, Inc. (OFLX)
Future Growth Prospects for Omega Flex, Inc.
Analysis of Key Growth Drivers
The company is focusing on product innovations, market expansions, and potential acquisitions as key growth drivers. In particular, the engineering expenses, which are crucial for developing new products, were reported at $1,058,000 for the third quarter of 2024, up from $992,000 in the same quarter of 2023, indicating a commitment to enhancing product offerings.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, net sales were $74,716,000, down 10.3% from $83,318,000 in 2023. However, the gross profit margin remained relatively stable at 61.1% compared to 61.7% in the prior year. Analysts project a recovery in sales as market conditions improve, potentially leading to revenue growth in subsequent quarters.
Strategic Initiatives or Partnerships
The company’s strategic initiatives include expanding its operational footprint in the U.S. and internationally. As of September 30, 2024, the cash balance stood at $45,873,000, providing a solid foundation for financing future growth initiatives. The company has a $15,000,000 line of credit available, which had no borrowings outstanding, allowing for flexibility in pursuing growth opportunities.
Competitive Advantages
Omega Flex, Inc. maintains competitive advantages through its established brand, high-quality products, and a solid financial position. The company recorded $1,741,000 in interest income for the nine months ended September 30, 2024, a significant increase from $1,179,000 in 2023, showcasing its effective cash management strategies.
| Key Financial Metrics | 2024 (Nine Months) | 2023 (Nine Months) |
|---|---|---|
| Net Sales | $74,716,000 | $83,318,000 |
| Gross Profit Margin | 61.1% | 61.7% |
| Operating Profit | $15,809,000 | $19,686,000 |
| Cash Balance | $45,873,000 | $46,356,000 |
| Interest Income | $1,741,000 | $1,179,000 |
Conclusion
The company's focus on product development, strategic partnerships, and financial stability positions it well for future growth, despite current market challenges. Continued investment in engineering and operational expansions is expected to drive revenue recovery and profitability enhancements in the coming years.
Omega Flex, Inc. (OFLX) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Article updated on 8 Nov 2024
Resources:
- Omega Flex, Inc. (OFLX) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Omega Flex, Inc. (OFLX)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Omega Flex, Inc. (OFLX)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.