Omega Flex, Inc. (NASDAQ: OFLX)

Sector: Industrials Industry: Specialty Industrial Machinery CIK: 0001317945
Market Cap 372.73 Mn
P/B 4.74
P/E 17.95
P/S 3.34
ROIC (Qtr) 16.30
Div Yield % 4.46
Rev 1y % (Qtr) -2.60
Total Debt (Qtr) 4.94 Mn
Debt/Equity (Qtr) 0.06
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About

Omega Flex, Inc., often represented by the stock symbol OFLX, is a prominent player in the manufacturing industry, specifically specializing in the production of flexible metal hoses. These hoses are utilized in a variety of applications to transport gases and liquids across different sectors such as residential and commercial construction, automotive, aerospace, and general industrial markets. The company's primary business activity revolves around the manufacture and sale of flexible metal hoses, along with proprietary fittings and accessories....

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Investment thesis

Bull case

  • Strong operating cash flow of 19.43M provides robust 3.93x coverage of total debt 4.94M, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 49.37M provide 64.70x coverage of short-term debt 763000, demonstrating strong liquidity position and minimal refinancing risk.
  • Strong tangible asset base of 100.32M provides 20.32x coverage of total debt 4.94M, indicating robust asset backing and low credit risk.
  • Operating cash flow of 19.43M provides strong 167.48x coverage of stock compensation 116000, indicating sustainable incentive practices.
  • Robust free cash flow of 17.25M exceeds capital expenditure of 2.18M by 7.93x, indicating strong organic growth funding capability.

Bear case

  • Operating cash flow of 19.43M barely covers its investment activities of (2.18M), with a coverage ratio of -8.93, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 19.43M provides thin coverage of dividend payments of (13.73M) with a -1.42 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Investment activities of (2.18M) provide weak support for R&D spending of 4.90M, which is -0.44x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Operating cash flow of 19.43M shows concerning coverage of minority interest expenses of (195000), which is -99.63x, suggesting complex corporate structure risks.
  • R&D investment of 4.90M represents just 0.13x of SG&A expenses of 37.05M, indicating potential underinvestment in innovation relative to administrative overhead.

Peer comparison

Companies in the Specialty Industrial Machinery
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 GEV GE Vernova Inc. 224.93 Bn 194.57 6.14 0.00 Bn
2 ETN Eaton Corp plc 153.13 Bn 38.99 5.75 11.22 Bn
3 PH Parker-Hannifin Corp 135.87 Bn 165.29 12.09 9.87 Bn
4 EMR Emerson Electric Co 111.68 Bn 47.10 4.65 13.41 Bn
5 ITW Illinois Tool Works Inc 86.68 Bn 28.27 5.40 8.97 Bn
6 CMI Cummins Inc 82.13 Bn 28.89 2.44 7.55 Bn
7 AME Ametek Inc/ 53.79 Bn 36.34 7.27 2.28 Bn
8 ROK Rockwell Automation, Inc 43.80 Bn 44.24 5.11 3.68 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 3.25 2.28
EV to Cash from Ops. EV/CFO 14.42 37.14
EV to Debt EV to Debt 68.39 34.39
EV to EBIT EV/EBIT 13.04 27.71
EV to EBITDA EV/EBITDA 12.34 25.34
EV to Free Cash Flow [EV/FCF] EV/FCF 15.51 133.36
EV to Market Cap EV to Market Cap 0.91 1.04
EV to Revenue EV/Rev 3.03 39.88
Price to Book Value [P/B] P/B 4.74 6.22
Price to Earnings [P/E] P/E 17.95 143.63
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 1.17 2.57
Dividend Payout Ratio % Div Payout % (Qtr) 85.50 15.73
Dividend per Basic Share Div per Share (Qtr) 1.36 0.91
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 79.58 82.53
Interest Coverage Int. cover (Qtr) -9.29 12.34
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -33.50 -45.99
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 7.62 118.48
Dividend Growth (1y) % Div 1y % (Qtr) 1.49 10.01
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -12.07 -283.03
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -12.73 -36.87
EBIT Growth (1y) % EBIT 1y % (Qtr) -13.51 -80.72
EBT Growth (1y) % EBT 1y % (Qtr) -13.13 -120.93
EPS Growth (1y) % EPS 1y % (Qtr) -12.64 -39.22
FCF Growth (1y) % FCF 1y % (Qtr) -19.36 85.55
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -3.18 0.87
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.96 0.62
Cash Payout Ratio Cash Payout (Qtr) 0.64 0.10
Cash Ratio Cash Ratio (Qtr) 3.39 3.01
Current Ratio Curr Ratio (Qtr) 5.61 4.97
Debt to Equity Ratio Debt/Equity (Qtr) 0.06 0.38
Interest Cover Ratio Int Coverage (Qtr) -9.29 12.34
Times Interest Earned Times Interest Earned (Qtr) -9.29 12.34
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 21.10 -7,291.27
EBIT Margin % EBIT Margin % (Qtr) 19.03 -7,413.30
EBT Margin % EBT Margin % (Qtr) 21.08 -9,015.79
Gross Margin % Gross Margin % (Qtr) 60.60 -32.61
Net Profit Margin % Net Margin % (Qtr) 16.10 -7,962.06