Today, Orion Engineered Carbons has released its 10-K report. The company, formerly known as Orion Engineered Carbons S.A., manufactures and sells carbon black products, operating in two segments, Specialty Carbon Black and Rubber Carbon Black. The company offers various carbon black grades for applications in coatings, printing, fiber, polymers, and tires, and operates internationally, with a base in Houston, Texas. Following this announcement, the company's shares have moved 1.3% on the market, and are now trading at a price of $23.53.
In its annual report, Orion Engineered Carbons highlighted several critical accounting policies and estimates. The company accounts for its inventories using the average cost method and periodically reviews inventory for potential obsolescence and declines in anticipated selling prices. It also records liabilities for loss contingencies when it is probable that a liability has been incurred and the amount of loss is reasonably estimable. The determination of the provision for income taxes and the calculation of tax benefits and liabilities are subject to management’s estimates and judgments due to the complexity of the tax laws and regulations in the tax jurisdictions in which the company operates.
Additionally, the report discusses potential impacts of new accounting pronouncements on the company's Consolidated Financial Statements. For more detailed information, the full 10-K submission can be found here.
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $386 | $322 | $316 | $1,547 | $2,031 | $1,888 |
| Gross Margins | 25% | 28% | 28% | 25% | 22% | 24% |
| Net Margins | 4% | 6% | 3% | 9% | 5% | 6% |
| Net Income (M) | $16 | $19 | $9 | $135 | $106 | $111 |
| Net Interest Expense (M) | $29 | $28 | $39 | $38 | $40 | $52 |
| Depreciation & Amort. (M) | $78 | $97 | $97 | $104 | $106 | $107 |
| Diluted Shares (M) | 61 | 61 | 61 | 61 | 61 | 59 |
| Earnings Per Share | $0.25 | $0.31 | $0.15 | $2.21 | $1.73 | $1.84 |
| EPS Growth | n/a | 24.0% | -51.61% | 1373.33% | -21.72% | 6.36% |
| Free Cash Flow (M) | $11 | $76 | -$20 | n/a | -$152 | $195 |
| Total Debt (M) | $41 | $36 | $738 | $783 | $915 | $149 |
| Net Debt / EBITDA | -0.14 | -0.21 | 5.51 | 2.16 | 2.82 | 0.28 |
| Current Ratio | 1.8 | 1.78 | 1.54 | 1.48 | 1.41 | 1.52 |
Based on the current trading price of $23.53 per share, the stock of Orion Engineered Carbons is likely undervalued due to its strong growth and value metrics. The company's revenues are rapidly growing at a rate of 39.7%, its gross margins are wider than the industry average at 24%, and its earnings per share have grown at an annualized rate of 39.5% over the last 6 years. Additionally, the stock's PEG ratio of 0.68 suggests that it may be undervalued with respect to its earning growth potential. However, the company's operating margins have been lower than the industry average, although they are showing signs of improvement with an average yearly growth rate of 5.3%.
In terms of value, Orion Engineered Carbons is trading near its fair value with a P/E ratio of 12.7 and a P/B ratio of 2.84, implying a fair value of $18.37 compared to its current price of $23.53. This indicates that the stock may be slightly overvalued based on these metrics. It's important to note that this analysis is not personalized financial advice and should be used for informational purposes only.
